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From Historic Mill to Vibrant Mixed-use Community

Originally published for the Spring 2024 Issue of NAIOP Development Magazine by Anthony Paletta.

The Judson Mill District honors Greenville, South Carolina’s rich textile manufacturing history as it weaves a new plan for the future.

Greenville, South Carolina, once styled itself the “Textile Capital of the World.” While it might be difficult to quantify that superlative, there’s no question this small city along the Reedy River in the foothills of the Blue Ridge Mountains had ample claim to being one of them.

The city and its surrounding landscape once contained 18 textile mills, only two of which remain operational today. Four of the mills burned down or were demolished, but the rest remain standing, and they have proved to be excellent fabric for reuse. At least nine have been converted to new functions, including residential, office, and mixed-use. The most recent conversion is Judson Mill, an 800,000-square-foot complex that has returned to life as a mixed-use project containing apartments, retail, offices, and more.

A Century of Industrial History

Adaptive reuse is often an undertaking for buildings that have long sat dusty, but this wasn’t the case at Judson Mill, which produced textiles from 1912 until 2015. Renovation of the mill began in 2019 as a project of Belmont Sayre Holdings of Chapel Hill, North Carolina, and Taft Family Ventures of Greenville, North Carolina. The project was designed by the Greenville, South Carolina, studio of McMillan Pazdan Smith Architecture.

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Retail-industrial Trend Poised to Spark Real Estate Innovation

Vans

By Linda Strowbridge 


Growing convergence between the retail and distribution sectors could have profound impacts on the commercial real estate industry. As retail and industrial clients adjust to shifts in consumer behavior and the overall economy, CRE professionals will be challenged to change their thinking about how to truly serve their clients. That challenge, however, could also produce innovative real estate products and new opportunities. That’s according to Dustin C. Read, Ph.D./J.D., author of the NAIOP Research Foundation report, “New Places and New Spaces for E-commerce Distribution: Three Strategies Bringing Industrial and Retail Real Estate Closer Together.”

What was the most interesting or significant discovery you made while researching the paper?

Read: It was probably that some of the most important phenomena related to the convergence of industrial and retail real estate were the ones that received the least attention. In the popular press, there has been lots of discussion of the conversion of obsolete retail buildings into distribution facilities. When you really drill down – even though there have been hundreds of articles written on that topic – the number of [these retail-to-distribution conversion] projects that have been successful in the U.S. is relatively small. I was surprised to see when you really start pulling back layers of the onion, there is more talk about it than there is actual execution of those types of projects.

The amalgamation of all the obstacles a developer must overcome to do one of these projects successfully is significant. The project has to be acquired at a relatively low purchase price and have the right access to infrastructure. It must be in a market that has good industrial characteristics and an area where the municipality has given up on the site as a viable retail location and is willing to rezone it for potential distribution. When all those things come together at the same time, there are opportunities for conversion. But often, they don’t all come together.


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Can Industrial be a Good Neighbor in Residential Areas?

 

 

Industrial

By Trey Barrineau

Industrial properties are often built near neighborhoods, but that isn’t always popular with the residents, who have legitimate concerns about noise, traffic and pollution from the increased volume of trucks and vans.

A recent NAIOP online panel discussion examined how developers can work with local communities to address these worries through outreach and engagement, as well as with design and technological innovations.

“Education is key to establishing that relationship early on,” said Sven Tustin, executive vice president with Conor Commercial, who moderated the panel. “The developer has to listen to concerns. Residents look at a site plan that shows 200 dock doors, and they assume that there will be 200 trucks coming in and out 24/7.”

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CommercialEdge: Charlotte Office, National Sales and Vacancy Rates Up in Midyear 2022

By Eliza Theiss 

Two and a half years after the pandemic began, the short-term future for the office sector remains uncertain, with record vacancy rates adding to the industry’s woes, according to a recent office report from CommericalEdge. And as hybrid and work-from-home business models continue to take hold — and rising inflation rates further deter workers from returning to traditional office settings — the sector’s long-term prospects are also murky.

Top Markets for Highest Listing Rate Growth

The average full-service equivalent listing rate in the top 50 U.S. office markets was $37.58 per square foot in June — up two cents from the previous month, but down 2.6% from the previous year.

With a 15.6% gain year-over-year (Y-o-Y), Charlotte, North Carolina, continued to lead the market in price growth, increasing its average full-service equivalent listing fee to $33.45 per square foot. Prices in this market grew at progressively faster rates for the fourth straight month.

Similarly, Miami office space ($47.23/square foot) had a gain of 8.4% over the previous year and continued to be one of the fastest-appreciating office markets. But Boston still outperformed it with a 12% increase, thanks to the city’s thriving life sciences industry.

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Mitigating Environmental Risks in Life Science Leases

Dangerous chemicals and infectious diseases are among the many hazardous materials that are handled inside life science facilities. Getty Images
By Michael Pollack

A lot of hazardous material passes through these facilities, so caution is necessary.

Life science industries span a range of uses — clinical research and trials; biologics; medical devices; pharmaceuticals; vaccines research, development, manufacturing, and distribution; plant and animal technology; and veterinary products, to name just a few. Leases for life science facilities can present unique challenges and considerations for building owners. Besides the particular demands life science uses place on electrical capacity, HVAC, floor loads, and waste removal, the activities within these facilities can pose many other risks.

Inherent in many life science facilities is the utilization, storage, and/or distribution of hazardous or toxic materials under applicable environmental laws. Of course, most common leases will contain standard indemnification clauses allocating responsibility to the tenant for losses resulting from its activities. 

When it comes to environmental issues, though, there are unique concerns for owners of life science properties. These include the ecological indemnity the principal owners provide to their lender (which typically comes from a well-funded source other than the property owner). There’s also the strict liability imposed under federal law on anyone in the chain of title for additional cleanup costs, whether or not they caused the contamination. 

Also, another lingering fact involves the owner would typically only have recourse from the tenant for a breach of the lease’s environmental restrictions.

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What the Urban to Suburban Shift Means for the Office Sector

Office

By Marie Ruff

Since the start of the pandemic, sleepy small towns and suburbs have taken on new luster as people have migrated en masse from the urban core, drawn by the lower cost of living and with the flexibility afforded by increased remote work options. Will this be the new normal, or will people move back to the major metropolises once we put the pandemic behind us? What does it mean for office real estate in the short and long term?

In a recent NAIOP webinar, experts from Marcus & Millichap shared their research and insights into how these trends are shaping the investment landscape for urban and suburban office spaces. They began by examining the broader economic context underlying the urban to suburban shift before discussing recent office sale trends, the impact of demographics and what’s ahead for this sector.

U.S. Office Supply and Demand Trends

Office vacancy rates have been elevated since the onset of the pandemic; however, office rate absorption has also been positive for five consecutive quarters. “Although it is soft, it is not as soft as some people perceive,” said John Chang, senior vice president, national director research services, Marcus & Millichap. There was only a brief period of net negative office space absorption in 2020 and have been making a recovery, albeit sometimes slowly, since.

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Industrial Space Demand Forecast, Third Quarter 2022

NAIOP research

By: Hany Guirguis, Ph.D., Manhattan College and Michael J. Seiler, DBA, William & Mary

Amid lower pressure on global supply chains, increasing inventory carrying costs, a cooling economy and a decrease in the rate of e-commerce expansion, retailers and logistics firms have slowed the rate at which they acquired additional industrial space this year. Net absorption of industrial space in the first two quarters of 2022 was 151.2 million square feet, down sharply from 2021’s record pace but still notably higher than in prior years (see Figure 2). The authors expect the still-hot industrial market to cool, and they forecast that the net absorption rate will continue to decline until it returns to the pre-pandemic trend. Total net absorption of industrial space in the second half of 2022 is forecast to be 112.4 million square feet, and full-year absorption in 2023 is forecast to be 209.4 million square feet (see Figure 1 for quarterly projections).

The Industrial Market

Supply chain congestion eased during the first half of 2022, as illustrated by the decline in the Federal Reserve Bank of New York’s Global Supply Chain Pressure Index from 4.35 in December 2021 to 2.41 in June 2022. As a result, retailers and logistics firms have shown less interest in leasing or buying industrial space before it is needed, a trend that contributed to higher absorption in 2021. Amazon’s decision to substantially scale back its expansion plans is the most prominent example of this shift in demand for industrial space. Nonetheless, smaller e-commerce firms, and even traditional retailers, continue to lease more distribution space despite slowing e-commerce growth as more consumers return to shopping at bricks-and-mortar retail. Industrial vacancy rates remain historically low as the ability to supply new space continues to face physical and political limitations in land-constrained markets. These low vacancy rates continue to cause asking rents, and ultimately transaction prices, to increase. Premium prices are being paid for properties with soon-to-expire leases and even vacancies as they allow owners to lease out more space at record-high market rates.

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Top Five US Metros for Life Sciences In 2022

Life sciences

TOP FIVE US METROS FOR LIFE SCIENCES IN 2022

By 

Growth in the life sciences sector has driven demand in recent years for both commercial real estate space and labor to accommodate this specialized sector. A new study by commercial real estate platform CommercialCafe set out to identify the best metros for life science companies in 2022 and assessed more than 40 metropolitan statistical areas (MSAs) in terms of regional talent pool and workforce; accessibility of local office markets; the degree of availability of existing dedicated property; as well as the state of the local pipeline aiming to expand local life sciences capacity.

Boston took the number one spot on the list, with San Francisco in second place, then San Diego third, New York fourth, and Washington, D.C., rounding out the top five.

A longtime “flagship market” for life sciences, the Boston metropolitan area remains a leader in the sector. The MSA stood out for several key indices scored in the ranking: Boston boasts the largest labor pool among the metros analyzed, as well as the largest life sciences real estate market — nearly 25 million square feet of existing dedicated property, of which just under 14 million square feet was LEED-certified space. What’s more, with an additional 23.8 million square feet of new life sciences developments in the pipeline — under construction, as well as in the planned and prospective stages — Boston seems firmly placed at number one for the foreseeable future.

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The Unexpected Challenges (and Solutions) of Multilevel Warehouse Design

Costco
  • By Russ Hazzard, Jonathan Chang, Development Magazine (photo of Vancouver, B.C. Costco by Raef Grohne)

Experiences in Canada and Asia provide case studies for building these complex properties.

Over the past 15 years, multilevel warehouses — particularly those used for retail purposes — have been a growing trend across Asia and, more recently, in the United States. However, some challenges accompany their design and construction that are not encountered in the traditional approach to large-format retail. With operational criteria at the top of the list, these challenges vary heavily based on several factors, including location, footprint, environment, jurisdictional requirements, and cultural and community influences.

The increase in demand for and construction of multilevel warehouses has unearthed numerous unique considerations not present in traditional warehouse environments. These challenges — each intricate in their own right — have required creative solutions and careful programming to successfully bring each project to life.

Parking and Vehicle Flow

One of the most critical design challenges for vertical warehouses is the traffic flow of vehicles and the structure’s parking. While the goal is to keep the sales level on a single floor for ease of operations and the consumer’s shopping experience, parking for multilevel warehouses can reside either above or below grade. Both options have pros and cons: Below-grade parking requires excavation, which can increase costs and complications. However, it provides a solution for lot coverage or height restrictions in situations where those apply. Above-grade or rooftop parking is preferred as it saves both construction time and money.

Customized resolutions to optimize vehicle traffic flow and increase ease of parking have also been employed, varying from warehouse to country to country. For example, in Sinjhuang, Taiwan, indication lights for open parking spaces are used to determine capacity at a glance. In Suzhou, China, car ramps at the entrance steer customers directly up to each floor, allowing them to bypass complete levels. Larger-than-regulation parking spaces — typically very compact in Asia — are also used, granting customers peace of mind. There is no need to worry about maneuvering around tightly packed vehicles in the garage. As an added benefit, large spaces also increase vehicle flow; running in and out of an area is completed in one move vs. two or three.

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UDO: Planning Committee to Review and Recommend

Compiled from REBIC, staff reports

REBIC’s Rob Nanfelt reported Tuesday that the City’s Planning Committee is taking up the matter of the proposed Unified Development Ordinance. Next month, committee members will take any additional recommendations before the third/final draft.

Last week, the Charlotte City Council received comments from the community during a public hearing on the proposed UDO. Click here to view the resolution. The entire hearing is available to view here – beginning approximately at the 2:51:30 mark.   

Next is a review and recommendation from the City’s Planning Committee scheduled to begin Tuesday, July 19, at 5 p.m. Those interested can view it on the City’s Planning Department YouTube Channel. The complete agenda and meeting packet is available here.

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UDO Meeting Set For July 11; CLT Water Plan Review Back On

REBIC's Rob Nenfelt and his team put together this week's Two For Tuesday and UDO takes center stage early next week.

UDO - Public Hearing Scheduled for Monday

The Charlotte City Council has scheduled a public hearing on the proposed Unified Development Ordinance (UDO) for Monday, July 11. The Council Action Review begins at 5:00 pm followed by the Public Forum/Business meeting at 6:30 pm. An agenda should be available here by Friday afternoon. Click here to sign up to speakRebic Logo

Also, Planning Staff has just released responses to public comments submitted prior to last Thursday's deadline. Additional changes will be reflected in the next and likely final draft when it is released which will occur prior to the expected vote on adoption in late August. Here's a link to the page containing the Second Draft Public Comments - With Staff Responses.

For additional UDO resources, please visit Charlotte's Unified Development Ordinance (UDO) - (charlotteudo.org).

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Vacant Storefronts Can be Repurposed into Retail Incubators

Retail incubator

Vacant Storefronts Can be Repurposed into Retail Incubators

They can provide an immediate boost in shopping districts and grow future businesses into long-term tenants.

  • Written by Ilana Preuss, Development Magazine

The COVID-19 pandemic has left America’s retail districts pockmarked with empty storefronts, but there is a creative solution. These vacant spaces, which often can be purchased or rented at reduced prices, are prime targets for conversion into retail incubators.

Retail incubators, like business incubators, nurture new or small-scale entrepreneurs during the startup phase. They mitigate some of the challenges of opening a business by providing financial and technical assistance, such as the basics of marketing and business plans. Tenants typically share space, ideas and operating expenses in locations that they could not otherwise afford. Many spaces have flexible or temporary lease terms. Some allow for small-scale manufacturing and hold community events, such as product demonstrations, fashion shows and art openings.

In addition to real estate, retail incubators provide fledgling businesses with valuable resources such as technical and financial assistance.  

According to the U.S. Chamber of Commerce, new business applications in the United States set an all-time record of 5.1 million in 2021. At the same time, the pandemic has led to consolidation of space and locations by major retail brands, which reduced the prospect of attracting businesses. The challenge for small businesses is they can’t immediately fill the footprints of major store closings. However, they can make temporary use of retail space to establish their businesses, and occupying formerly abandoned stores can help energize struggling downtowns.

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Permit Reform Legislation Advances Following NAIOP’s N.C. Advocacy Day

BY TOBY BURKE,   

Members from NAIOP’s three chapters in North Carolina traveled to Raleigh last week to advance the priorities of the commercial real estate development industry in meetings with state lawmakers. The top priority for NAIOP of North Carolina, the state alliance of NAIOP chapters, is the passage and enactment of House Bill 291, permit reform legislation sponsored by State Representative Jeff Zenger.

Local building permits are an essential and fundamental requirement for the development and improvement of commercial and residential properties. However, the processes for obtaining these permits can vary by city and county in North Carolina. These variations lead to uncertainties and delays in projects moving forward, which can impact the costs, financing and contractional relationships with contractors and providers of construction equipment and materials.

The enactment of House Bill 291 would bring reforms to the permitting process similar to those advocated by our local chapter in Georgia which were ultimately enacted into law in that state. These reforms to the local permitting process bring more predictability and accountability, reducing uncertainty and unnecessary delays. Core elements of the bill include:

  • A local permitting entity has 21 days in which review the plans.
  • During the 21 days, the local entity shall resolve issues associated with the application and may seek additional information from the applicant.
  • If additional information is needed or the application must be resubmitted, the permitting entity has 15 days from receipt of the additional information to issue a permit.
  • If the local permitting entity is unable to meet the time parameters, the applicant or inspections department may seek approval from a certified third-party (engineer) or the Department of Insurance.

The North Carolina House of Representatives passed House Bill 291 in May of 2021 on bipartisan vote of 79-33, sending the bill to the state Senate. The legislation was eventually sent to the commerce and insurance committee in March for their consideration. Our meetings last week focused on urging Senate leadership and the committee chairs to move this important legislation forward before adjourning for the year as early as the end of June. NAIOP of North Carolina’s advocacy played a key role in HB 291 being scheduled the following day for a hearing before the insurance committee the subsequent week.


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Class A Buildings Push Office Market Stabilization

Office market vacancy rates kept surging for the 10th straight quarter to start 2022, according to the NAIOP Research Foundation. The group recently published its Office Space Demand Forecast for Q2 2022. You can read the full report here
Office building
The group boasted that Class A buildings are key in many parts of the country, bolstering net absorption rates in areas like the Sun Belt. These work spaces are key in brining in skilled employees. The group said "suburban markets and life sciences hubs are recovering better than the national average as more employers embrace a return to the office and the pandemic eases."

Other key takeaways mentioned 

  • Leasing activity is up year over year, which signals that firms are more comfortable making longer-term commitments to office space. Property owners have been willing to offer greater tenant improvements to encourage signing, indicating that tenants still have the upper hand in lease negotiations. These signals indicate a move toward a more stable equilibrium as the office market finds its balance.
     
  • Given these trends and signs of a slowing – but still growing – economy, net office space absorption in the remaining three quarters of 2022 is forecast to be 46.9 million square feet, essentially unchanged from the previous forecast for these quarters (46.6 million square feet).
     
  • Total net absorption in 2023 is forecast to be 47.3 million square feet, with an additional 6.5 million square feet absorbed in the first quarter of 2024.

6 Ways to Breathe Life Into Mixed-use Spaces

 

originally published by JEFF POLLAK, MANAGING PRINCIPAL, STREETSENSE for Building Design & Construction Network and shred by NAIOP National

6 ways to breathe life into mixed-use spaces
Mixed-use spaces elicit mixed emotions as they offer bigger, better, and bolder versions of their original iterations. This ups the ante for developers, but it's a worthy challenge because the end product benefits the local community and the quality of life for residents and users alike. The risk comes when a mixed-use place is positioned as “everything to everyone,” which rarely works.
To activate a space and realize its fullest potential, here are six tactics to consider in your strategic process: 
  1. Dig into Data
  2. Pay homage to history
  3. Fill in the missing gaps
  4. Put people first and dollars will follow
  5. Foster community and give a warm welcome
  6. Create a brand that underlines and elevates a space
Read the Full Article!

Upcycling: Reimagining Underutilized Commercial Space as Public Space

Originally published by Philip Wilkinson and Teresa Bucco for NAIOP Development Magazine Summer 2021 issue.

A project in Pittsburgh demonstrates the potential of activating common areas in older retail destinations.

For nearly two decades, online shopping has seen steady growth in both traffic and sales, which has forced traditional retailers to think of new ways to draw people into brick-and-mortar stores. In more recent years, shifts toward experiential retail saw many retailers overhauling store designs to give shoppers more hyperlocal, boutique or high-end encounters while encouraging online buying and in-store pickup. 

However, concepts such as Wal-Mart’s Neighborhood Market and Target’s City Target — launched to reach transit-oriented communities and supplement declining sales at traditional big-box locations — were often slow to catch on or showed mixed results, according to a 2019 Mashed article.

Then the COVID-19 pandemic accelerated the decline of in-person buying. Digital Commerce 360 reports that total online spending in 2020 reached $861 billion, up 44% from 2019, accounting for 21.3% of total retail sales. Adobe’s Digital Economy Index shows that 2020 accelerated the typical year-over-year growth of e-commerce by four to six years. Conversely, sales from brick-and-mortar retailers fell an estimated 14%  to just $4.2 trillion in 2020, according to a June 2020 Insider Intelligence study. Due to the rise of e-commerce and the economic effects of the pandemic, it’s clear that commercial centers must evolve to become more than just shopping destinations.

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Lessons in Mitigating Risk on a Megaproject

Originally published in NAIOP's Development Magazine Spring 2021 Issue by Ann Moore.

Waterfront development in California used multiple strategies to get off the ground.

Megaprojects can transform landscapes, improve quality of life and deliver significant economic benefits to their communities. When they are sited on a waterfront in a binational urban area, they take on even more complexity. In Southern California’s San Diego County, a megaproject will transform a formerly blighted stretch of waterfront into a thriving destination. The project team is pursuing innovative ways to reduce the risk that could be instructive to other development teams. 

A megaproject is defined by its scale and complexity. Typically costing $1 billion or more, such projects take many years to develop and build, involve multiple public and private stakeholders and impact millions of people, according to the Oxford Handbook of Megaproject Management. A considerable upside also brings great risk, which must be managed to improve the chances of success. 

On approximately 535 acres, the Chula Vista Bayfront is larger than Disneyland and one of the last significant large-scale waterfront development opportunities in Southern California. Once defined by a power plant and an aerospace factory, this brownfield waterfront is ripe for redevelopment in the U.S.-Mexico border region of 6.5 million people. The location is about a 15-minute drive from the busiest land border crossing in the western hemisphere. More than 100,000 people cross the San Diego-Tijuana, Mexico, border every day. Thus, the project site can target a market that includes U.S. citizens, Mexican nationals, and travelers using airports in San Diego and Tijuana. 

Full Article

A New Life for an Old Department Store

Originally published by Brent Carroll for NAIOP's Spring 2021 Issue.

An adaptive reuse project revitalizes an iconic retail tower in Portland, Oregon.

For residents of a certain age in Portland, Oregon, the phrase “meet me under the clock” meant the clock on the main floor of the Meier & Frank department store, which first opened nearly 150 years ago. The 16-story terracotta landmark building at 555 Southwest Morrison Street encompasses an entire city block near Pioneer Courthouse Square, widely known as “Portland’s living room.”

In November 2016, a new era for the Meier & Frank Building began when KBS purchased the asset for $54 million in a joint venture with private development firm Sterling Bay with the intent of repositioning the property. Converting part of a beloved former department store into a fully leased Class A mixed-use space while preserving the historical integrity of the original property required hard work as well as some creative problem-solving. 

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How Has COVID-19 Accelerated Dining Trends?

Originally published by Gary Tasman on March 30, 2021, for NAIOP.com.

If nothing else, 2020 taught us that we can all adapt to changing conditions and learn how to navigate through radical shifts in how we function day-to-day. This is the case not only for individuals and families but also for businesses. Millions of business owners and managers were forced to radically reinvent their business models to remain solvent during the COVID-19 crisis. This is especially true of the restaurant industry, which is rapidly accelerating new and pre-existing trends.

Stay-at-home regulations, social distancing, and public apprehension have forced restaurants to shift their models significantly to focus on delivery and carry-out to stay profitable. Fortunately for many establishments, this quick-service restaurant trend had already emerged pre-pandemic. Restaurants that had already embraced this shift were better positioned to weather the storm produced by COVID-19.

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Activating Public Spaces Can Attract Users, Create Community

Posted on July 26, 2019

By Angelo Carusi

A Nashville-area mixed-use development illustrates the uplifting potential of landscape architecture.

Mixed-use developers are devoting premium real estate to outdoor public spaces that invite the community to linger. These communal areas are continually being repurposed and reimagined through bold and creative design strategies.

The design for dynamic, open-air gathering spaces can be as important as the design for revenue-generating real estate products. Physical spaces that promote dwell time are increasingly appreciated by tenants and end users. Outdoor “rooms” where people pause to sit with a cup of coffee, watch their children play, respond to emails and texts or enjoy casual conversations are spaces where life, community, architecture and nature come together, allowing for meaningful experiences that encourage people to return to the property.

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