Quote:
Originally Posted by Marcu
Like the Hancock, most mixed-use towers are organized such that each part, or "use", is owned and managed by a seperate company. So the office part can be owned by a firm that prefers steady cash flow and the residential part can be owned by a company that prefers a one time cash payout. There is no one-owner-per-building rule. Companies can act in the same manner as households act in a condo building and own separate and often completely different parts of any building.
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That's a good point, and I realize that you could make the entire office portion of a mixed use building essentially one large office condo, but still, office space within the context of a mixed use building is simply not as valuable as a comparable space in an office only tower. A mixed use building has more risk involved: relying on other owners, the owner has less control over building systems, etc. Plus, you just don't draw the same quality of tenants in a mixed use. So the credit is worse, so your leverage to buy is more expensive, so it's less profitable to own.
Taking your argument to its logical conclusion, office only towers could be split up with different owners too. But since doing so is pretty much a gigantic headache, no one wants to and it's practically never done. I've seen it a few times, but the end result is almost always a underleased building that gets bought out by a single owner and gets leased up. Like more or less everything else in this world, if it were a profitable activity, people would be doing it.
Seriously, from the developers point of view, what is the benefit of mixing uses? It sounds nice, I guess, but besides that what is there? Nearly all new office towers have large amenity bases, so the tenants aren't exactly lacking for anything. Why the temptation to stick houses on top? Plus, high office floors are the most valuable in real estate so if anything, you'd put the condos on the bottom, but then the less valuable low rise, no-view condos and their owners hardly enhance the curb appeal of a would be World HQ for some insurance company or whatever.
I think the clearest evidence that office/residential aren't compatible is the fact that office builders and residential builders self segregate. There are office developers and there are residential developers, and for the most part the two don't cross over. The two industries seem similar, because they both involve building tall structures, but they really are not much alike. A good office developer is likely not going to do a very good job at the residential portion. And since there is really no benefit to mixing uses in the CBD (again from the perspective of the developer) why would he jeopardize the project for something that adds zero value? Why would his lender let him?
Where mixed use has its place is in TOD around suburban downtowns and city neighborhoods. To me, that's where this model really works. Not so much for the CBD.
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