2023 Fall Issue of Urban Land - 43

a downtown office neighborhood through
adaptive reuse or development from scratch.
Nowadays, developers and investors are finding
more success improving the neighborhood
itself with their investments rather than
launching new traditional master-planned,
mixed-use areas. They need to think about
the ecosystem they are investing in and consider
the best neighborhoods and markets
for their projects. For example, Fulton Market
in Chicago is thriving despite the overall
struggles of the Chicago market.
ADA HEALEY: One key to successful mixeduse
projects is executing them in areas that
have existing density and a mix of other uses
in close proximity. We prefer having mostly
a single use in a building with some retail at
the base, while having complementary uses
in tight proximity. In Seattle's South Lake
Union neighborhood, we've had some success
with large mixed-use projects, but executing
across multiple blocks separated by
streets or other projects is less risky. Being
close to rail and leveraging existing mixeduse
neighborhoods is helpful. We pay particular
attention to the design of the ground
level, ensuring active uses and inviting spaces
for pedestrians.
NOBLE CARPENTER: When the pandemic hit,
there was talk about whether cities would
recover: people could work from anywhere,
cities were too dense and unhealthy. However,
it is abundantly clear that cities have
come roaring back. Even downtown Los
Angeles' new multifamily developments are
well leased, and developers are exceeding
their rent expectations, despite downtown
Los Angeles' office vacancies. Successful
new developments have vibrancy; there is
excitement and a sense of place. The current
challenge for new development is the upsidedown
financing market. The cost of debt and
equity is very expensive, making development
very difficult.
What are the challenges and opportunities
for obtaining financing?
CHANG: The focus is on investors who are
currently able to invest all cash, including
sovereign high-net-worth organizations
and high-net-worth families. The discussion
FALL 2023
URBAN LAND
43
around mixed use historically centered on
billion-dollar projects, but now we are seeing
activity on projects in the range of $10 million
to $30 million in places like Virginia and
Washington, D.C. These projects can be scalable
for investors who aren't dependent on
financing. I think we will start seeing larger
projects come into play in the next six to
18 months, contingent upon financing availability.
Offices may be the canary in the coal
mine. When you can start financing office
projects again, that will be the inflection
point for the broader market's rebound.
CARPENTER: Historically, when you had an
idea for development, you could talk to your
trusted equity sources and have a level of
certainty about finding financing. Nowadays,
you almost need to have financing
lined up first before discussing a development
plan with potential partners. Banks are
overexposed to real estate and are looking
to decrease their real estate loan portfolios.
Even well-established developers are struggling
to secure development financing. It's a
challenging time, and it will continue to be
for another six months. Interest rates should
start to decrease once there is consensus
that inflation is under control. I'm extremely
optimistic about the opportunities ahead.
HEALEY: If your project includes an office
use, having it preleased is really important.
In today's capital market, being prepared to
Community
celebration of
the installation of
Saya Moriyasu's
artwork Maya at
Vulcan Real Estate's
Batik, a sevenstory
apartment
community in
Seattle that includes
195 apartments over
retail.
FEATURES
VUL CAN REAL ES T A TE AND
ERIN L ODI
2023 Fall Issue of Urban Land

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