Growing demand for office space is key component to some urban mixed-use projects.

When Yizhak Toledano, Chief Executive Officer of Sky Development Inc., began planning a major mixed-use project for downtown Orlando (Florida), he knew that the office component would be critical to its overall success.  

“Today, people want to live very close to work,” said Toledano in a recent interview. “It’s essential for developers in urban locations to offer a complete package that includes office space and retail services, along with residential units. With this mixed-use concept, a resident can ride the elevator to the ground floor for a cup of coffee, then go right back up to work without ever needing a vehicle.”

In urban markets across the nation, mixed-use developers are placing an increasing emphasis on office space – especially with the national slowdown in residential sales. In states like Florida, California, Nevada and New York, developers are bringing new commercial space to market as quickly as possible.

“We’ve seen a major shift across the country in the last 24 months because the pent-up demand for office space is so big,” Toledano said. “In urban markets where land is a scarce resource, mixed-use projects with substantial amounts of office space are doing quite well.”

However, developers are using highly varied strategies in designing and marketing their office spaces. Some projects offer office condominium spaces that have a particular appeal to a development’s residential owners. Other projects cater to corporations and large firms that prefer to lease one or more floors. And a third approach is to include an executive business center with office suites that cater to individual entrepreneurs or professionals.

“Developers need to look very carefully at the economics of each individual market when considering the issue of office ownership or leasing,” said Lewis M. Goodkin, President of Goodkin Consulting. “There are many factors that go into the decision to buy or lease, and ignoring the economics is an invitation for disaster.”


Florida: A Trend-Setting State
Nowhere is the trend toward urban mixed-use developments greater than in Florida, which continues to enjoy strong population and job growth. At the same time, land suitable for new development is very limited, especially in prime built-out locations.  

As a result, developers are turning to mixed-use concepts in leading markets like Orlando, St. Petersburg, and South Florida.

One of the largest is Skycity, Sky Development’s $300 million downtown Orlando project, which includes an office tower and a hotel/residential tower on a 2.97-acre site.

Because local market conditions currently favor commercial over residential uses, Toledano says the project’s first phase will be Sky Tower I, a 25-story, Class-A office tower with 515,000 square feet of leasable space, along with ground floor retail. Sky Tower II will be a 35-story, 350-room hotel beneath 120 luxury residential units and ground level retail space.

“We are responding to the Orlando market’s need for attractive new space with all the right amenities,” said Toledano, who adds that the project’s strategic location near the new Orange County Court House and rapid transit LYNX station will be critical factors in attracting tenants.

“Skycity is the first mixed-use project of this magnitude in the downtown area,” he said. “Its location directly facing I-4 will give it unobstructed visibility from one of Florida’s most traveled arteries, rendering it a landmark gateway to downtown.”

The office space in Sky Tower I begins on the tenth floor above a concealed parking garage and fitness center, affording the offices sweeping views of downtown Orlando. A 20,000 square-foot health club on the eleventh floor will be a key amenity to office tenants. Leasing activity will begin in the fourth quarter, and construction is expected to start in 2009.

Aventura-based Sky Development is also planning a mixed-use project in its home community: City Place at Aventura. This 7.4-acre project includes 150,000 square feet of Class-A office space in an eight-story mixed-use development with 53 two-story townhomes, 51 residential condos and over 46,435 square feet of ground-floor retail. Construction on the office building and a related parking garage is scheduled to start by year-end.

Just a few miles to the north, Miami-based V-Strategic Group, LLC is developing European Club, a 30-story, luxury mixed-use project in Hallandale Beach’s growing financial district. European Club will have eight floors of Class-A office condominium space totaling 91,000 square feet, as well as a public plaza, ground level banking, restaurant and retail space, 118 residential condominiums and 135 condominium-hotel suites. Office owners can take advantage of a 14,000-square-foot spa and gym.

“With the tremendous economic growth that Hallandale and neighboring Hollywood Beach have been experiencing, European Club office tenants will be working in the midst of a burgeoning business hub,” said Donna Abood, Chief Executive Officer of Colliers Abood Wood-Fay, which is handling the project’s commercial leasing. “We expect the office space to be a premium product that is perfectly in line with the property’s up-market residential and condo/hotel components.”  

On Florida’s Gulf Coast, construction is well underway on Signature Place, a 36-story mixed-use project — destined to be an icon — in downtown St. Petersburg with 36,737 square feet of Class-A office condominium space. The tallest building in Pinellas County, Signature Place will also have 206 condo residences and 40 lofts.

When complete, Signature Place will span a city block in the downtown’s waterfront live/work/play corridor.

“The architecture and downtown location makes Signature Place a most desirable corporate headquarters location for any business that seeks a presence in the Tampa Bay area,” said Developer Joel Cantor, CEO of Cantor Development. An estimated 2,400 to 12,890 square feet of office space is available on each of the building’s first four floors.

Another ambitious mixed-use project is expected to reshape the office market in Plantation, a Fort Lauderdale suburb with a significant corporate presence.  U.S. Capital Holdings, LLC, a locally based private equity investor, recently submitted formal plans for 321 North, a $350 million redevelopment on the site of a former regional shopping center that will pursue Leadership in Energy and Environmental Design (LEED®) certification.

In addition to 650,000 square feet of retail space and 400 to 600 residential units, 321 North will feature 300,000 to 400,000 square feet of new Class-A office space in two new buildings.

“We look forward to seeing this project contribute to the local economy by adding an enticing and compelling destination that lures new businesses and encourages leisure spending,” said Bryan Liu, Vice President of U.S. Capital.  

More than 50 Fortune 500 companies, including Motorola, American Express, and DHL, now have operations in Plantation. With the lowest office vacancy rate in metropolitan Fort Lauderdale (Broward County), Liu is optimistic that 321 North’s office component will advance the city’s growth as an employment center.

The mixed-use project is a key component in the city’s 850-acre Midtown District, which will include public infrastructure elements to enhance the street, encourage pedestrian activity and create parks and plazas.

As Plantation Mayor Rae Carole Armstrong said, “It is anticipated that U.S. Capital’s plans will combine the best of Plantation’s suburban lifestyle with the excitement of dynamic and upscale venues to serve the resident and business community.”


Lessons for Developers
For developers considering mixed-use projects with office components, these Florida projects illustrate some of the issues that need careful consideration:

• Demand for office space must be carefully analyzed for each individual market. Trying to utilize a “cookie-cutter” approach is a recipe for failure, according to Toledano. “You have to conduct a good market study before doing anything else. That analysis helps determine what to build and who will use that space – small professional firms or a corporate headquarters that will take three to five floors.”
• Finding the right location is far more critical to the success of a mixed-use project than for a stand-alone office tower. Developers agree that an urban “critical mass” is needed to support a multipurpose facility. And the potential economic return, either through sales or rent, needs to be strong enough to justify the higher costs of land, design and construction in an urban setting.
• Neighboring buildings, services and features should be factored into the site selection process. Nearby restaurants, recreational and cultural attractions – as well as any transit stations or services – can significantly enhance the appeal of the office space. If these elements are not currently present, the developer may need to compensate by adding more amenities to the mixed-use concept.
• A decision on whether to sell office condominiums or offer leased space depends on the local market and target user. “The key is to look at the office market economics,” said Goodkin. “You have to compare the cost of owning versus the cost of renting.”
• Offering a high level of amenities to office owners and tenants is a vital element of today’s “life-work-play” package. Fitness centers, coffee shops and business center support services are quickly becoming “basics” in a modern office environment.
• Parking structures and operations must also be factored into the mix. A residential garage, for instance, may need an access control system, while an office or retail garage should allow convenient short-term access for visitors, customers and employees.