Mixed-Use Industrial Development: Building Community Around Industry
To succeed in today’s economy, one that is driven by how and where things are made, development must center on industry. While the value of traditional mixed-use development has long been established in the world of commercial real estate, the introduction of industrial typologies into these developments is often met with skepticism. And yet, several interrelated trends not only support mixed-use industrial development, but help to prove its value. First, we will examine these trends, or background conditions, that build the case for mixed-use industrial development. Then, we will take a brief look at Amazon’s business model for a lesson in the value of synergies. Finally, we will break down the elements of use to prove that when combined, these elements provide more value than if those uses were developed independently. We offer prototypes of how these uses might be combined to create synergistic ecosystems.
Background Conditions
Industrial development was once relegated to rural areas where cheap land, limited neighbors, and highway access made financial and logistical sense. But in recent years, the rise of ecommerce has had major implications on the location of industrial development, driving it toward more populated, even urban, areas. For one, expectation of same-day or otherwise rapid delivery has made proximity to consumers essential. Another implication is the shift in labor needed to run ecommerce operations; no longer are warehouses run by a few individuals with a few more in a small office. Today, distribution centers employ hundreds, often thousands, of people. As a result, ecommerce centers must locate close to workforce in more densely populated areas.
The change in the model of distribution has also driven a change in the transportation that serves it. With the need for more rapid delivery directly to consumers, there is increased reliance on smaller vehicles. A maintained fleet of sprinter vans and small trucks now displaces the 53-foot trailer as the driver for site value and design. Fleet storage, even as housed in garages for potential electrified vehicles, is now the determinant of Class A industrial development rather than trailer storage.
On the supply side, COVID-19 has magnified vulnerabilities within our supply chain. As an example, at the beginning of the pandemic was a concern for a shortage of medical equipment which is now primarily manufactured and distributed from China. This underscored the need for a more resilient supply chain — one that is increasingly local. It is likely that forthcoming shifts in policy will recognize and respond to vulnerability in the supply chain through an increase in American manufacturing. The U.S. will certainly remain globalized but more goods, and certain kinds of goods, will be produced domestically to safeguard from future threats.
Following these trends is a change in attitude toward community planning and zoning. The separation of uses which had been prevalent at the end of the twentieth century, has been replaced with approaches that call for greater integration and the development of walkable communities that bring together where people work, live and play. Inevitably and increasingly, clean industrial uses are being demonstrated as belonging to this model, especially with their increased need for labor.
The Power of Synergies
Nothing demonstrates the value of an integrated development model more than the company that is driving the greatest need for industrial development during the COVID-19 crisis: Amazon. Amazon is so much more than an online retailer. In fact, a quick look into the full spectrum of businesses under the Amazon umbrella reveals that online sales represent only 50% of the company’s revenue while various other facets of the business including Amazon Web Services, third party sellers, physical stores, and subscription services make up the remaining half. While Amazon’s entry into more and more (often seemingly disparate) markets may have raised eyebrows years ago, it is now clear that this strategy created a network effect — a mechanism through which customers return to Amazon time and time again. Amazon thrives off synergies amongst its many services and products; for example, producing movies and television shows to hook consumers to Prime or launching Amazon Web Services to engage third party sellers.
The result of the network effect and the synergies amongst products and services is a self-sustaining ecosystem. The question for developers becomes why develop to only that portion of the new industrial paradigm that drives the least margin? Why not develop to the full value of integration and develop integrated solutions, especially as this model is more widely adopted?
Amazon’s model is directly applicable to mixed-use industrial development: symbiotic uses work together to create an ecosystem that is not only financially viable but also creates value for developers, users, and communities. Developers benefit from the ability to maximize land value, especially in dense areas, and diversify their assets. Users find value in the convenience of multiple uses that are in close proximity. For communities, development that is more complex, as opposed to pure industrial or pure retail, brings diverse employment opportunities, access to goods and services, and more aesthetically appealing architecture.
Elements of Mixed-Use Industrial Design
What comprises mixed-use industrial developments? The foundation is a familiar typology for industrial developers — the distribution center. Complementary uses are added to create a synergistic ecosystem.
The most obvious of these are already proven to pair well with traditional industrial: light manufacturing, retail, and office. While light manufacturing may require increased electrical and/or structural infrastructure, it has industrial bones. Retail and industrial have proven to work well together in models like IKEA or even big box retailers. People still prefer to interact with others and their potential purchases even if they chose to retrieve them from a warehouse or purchase them online. Already that synergy suggests the need for other forms of labor and leadership, expanding the office footprint, and providing the opportunity for corporate presence as these become places of greater value for business.
Following the Amazon model, there is increased desire to control content rather than simply distribute it. That content comes in many forms, including virtual. Outside of the typical uses that blend well with industrial, we have started to see an increased need for studio space as more and more content is created for streaming services and social media platforms. The physical attributes of industrial spaces and studio spaces have much in common, including the need for high volume clear space, storage, and production space. Experiential educational space such as maker spaces and test kitchens, as well as technical schools, makes sense given the proximity to light manufacturing and distribution, and can create pathways to employment and opportunities for continuing education and mentorship.
As the development becomes more oriented around people, demand will naturally increase for residential, amenity and hospitality space, parking, and planned open space. These additional synergistic uses start to drive the economics of the development, as well as add value through shared resources such as parking being utilized by office, residential, and potential fleet storage users or spaces rented for public or private events that spark interaction within the development. Additional open space, whether open parks and walking trails or green rooftops, creates meaningful connections between the built environment and nature. These spaces provide opportunities for residents, employees, and the public to gather, relax, or play, at once elevating the human experience while meeting zoning and stormwater requirements.
With several large uses in one place, open space is necessary for zoning and stormwater management. Open space also creates meaningful connections between the built environment and nature through parks and green spaces where visitors can gather, relax, and play. Balancing built environments with open space creates dynamic places that elevate the human experience within them.
Ecosystem Prototypes
The elements of use outlined above are not a strict formula for mixed-use industrial development. These uses can be combined in any number of sequences that create value that transcends their value independently. The following are three iterations of ecosystems that begin to demonstrate the potential of mixed-use industrial development.
Workforce Ecosystem: This ecosystem is oriented around people. Light manufacturing requires people, who need goods, education, and a place to live. This model harkens back to the factory town of the past — it is a modern incarnation of an old idea.
Innovation Ecosystem: This development is oriented around the process of designing, manufacturing, and distributing goods. Added to the foundation of the distribution center is light manufacturing and creative office space for the design and corporate team. The increased need for labor makes it symbiotic with residential and the driver of innovation creates the opportunity for education.
Creative Ecosystem: This development is oriented toward creative content such as film and television. Content comes to life in studio and is screened and celebrated in public space. Office space offers a home base for studio heads and corporate activities like marketing and HR. Distribution is needed to store sets as well as to accommodate trucks coming in and out.
As demonstrated through these examples, industrialized uses are building blocks for community. Industry, especially at it works now in ways that are more sustainable and resilient, is no longer relegated to a boxy building on the edge of town. Instead, it has the potential to act as the foundation for vibrant communities that bring economic value to those within them.
