Outline

1. Introduction
2. History
3. Present status in US
4. Present status in India
5. Advantages
6. Disadvantages
7. Scope in India
8. Conclusion

Canada’s developers favor a mixed-use format as the focus

turns to city retail
BY SUSAN THORNE

Mixed-use centers are getting as much attention in

Canada as they have lately in the United States.

Combining a shopping center with residential, office or

other uses is not a new phenomenon north of the border,
but it is one being seen more frequently as retailers and
shopping center developers turn their attentions to
opportunities in the cities.

Because urban real estate values are high, mixing uses

can be an effective strategy for making a project
profitable, real estate executives say.

“Certainly the industry is maturing in Canada; there are fewer traditional shopping center
opportunities out there,” said Blake Hudema, an urban planner and shopping center consultant
who is president of the Hudema Consulting Group, in Vancouver, British Columbia. “But
downtown, the land cost and density of the surrounding land uses dictate that you have to be
more innovative and creative in your approach to shopping centers.”

It’s not entirely a matter of land cost, Hudema notes. Mixed-use centers are more practical in
downtown settings, where there isn’t the space for traditional shopping centers and their
sprawling parking lots.
Density was a primary consideration for Grosvenor Canada in the case of The Rise, a retail and
residential project that the Vancouver-based developer is undertaking on a sloping, full-block
site on Vancouver’s Cambie Street.

“This is an urban site and we’ve paid urban land prices,” explained Ryan P. Beechinor, a vice
president at Grosvenor. “We have to utilize the full density or we will not be competitive.”

Given the adjacent neighborhood’s proliferation of large-scale retail, Grosvenor decided on a

cluster of big-box stores to give its center critical mass as a shopping destination. Those five
anchors, totaling 180,000 square feet of retail, will include a Save-On Foods supermarket, a
Winners and a Home Sense store. There will also be 40,000 square feet of small retail at street
level and 500 underground parking spaces.

Grosvenor started out with a purely retail development concept, but the city’s planning
department encouraged the company to add a residential component, in keeping with
Vancouver’s goal of expanding the downtown population. Plans now call for 82,000 square feet
of town houses on top of the retail premises.

This 92-unit residential component takes advantage of

Vancouver’s “reverse migration” trend in favor of
downtown living, Beechinor points out, and its residents
will provide a built-in market for the retail.

And it isn’t just new projects that are combining uses.

Toronto-based Cadillac Fairview plans an extension to
the Eaton Centre in downtown Toronto that will stack
three levels of parking and a three-story building housing
Ryerson University’s business school above 130,000
square feet of large-format retail.

“This part of the [Eaton Centre] complex will allow larger-format retailers to be part of the mall,
thus enhancing our retail mix,” said John Sullivan, senior vice president of development at
Cadillac Fairview. Rents for the new stores, located at street level and below, will range from
C$30 ($24) to C$35 per square foot, Sullivan says. Future tenants (the opening date is September
2006) are expected to include an electronics outlet and a grocery store.

The Eaton Centre annex is the first of several mixed-use projects

planned by Cadillac Fairview. Sullivan notes that there is a limited
market at present for regional malls and office space, his company’s
core investment vehicles. “As an adjunct to those activities, we’re
looking at larger mixed-use projects in the major cities — Montréal,
Calgary, Toronto and Vancouver — as a way to continue our
growth,” he said. The first of these initiatives will be announced in
late spring.
Introducing other uses helps revitalize malls in central locations, executives say. An example is
Cadillac Fairview’s Don Mills Town Centre, a 49-year-old, 400,000-square-foot Toronto-area
shopping center that is to be reconfigured as a hybrid “mall with a tail” with 1,500 apartment
condominiums in adjacent buildings. The starting date for this renewal has not yet been set.

The benefits of mixed-use refurbishment can already be seen at North Hill Centre, in Calgary, a
Sears-anchored enclosed center that was underperforming when it was acquired by Regina,
Saskatchewan-based Harvard Developments in 1999. Harvard’s C$26 million reconfiguration of
North Hill, completed in 2003, created an almost entirely new retail mix totaling about 485,000
square feet of gross leasable area (GLA), and turned the center around to face the Trans-Canada
Highway running alongside it. Six big-box tenants were added on the mall pad, including
Kinko’s, Mark’s Work Wearhouse and Petcetera.

Harvard also incorporated 32,000 square feet of

office space in the complex, and leased air space
to a local developer who constructed two eight-
story towers housing 175 luxury condominium
units; the second of these was completed in 2004.

Cameron J. Costley, CSM, Harvard’s general manager of North Hill Centre and suburban
properties, attributes a significant share of the center’s revived customer traffic to the new
residents. “With those towers, you’re bringing over 460 residents here multiple times per week,”
he observed. The center is thriving, Costley says, ringing up sales of C$450 per square foot
compared with C$314 prior to its redevelopment, and 96.7 percent of the retail space is leased.

Including residential and office in a project makes good sense, he maintains. “It makes you
wonder why more developers haven’t done it.”

Retail developers are not the only ones providing impetus to the mixed-use trend. Central City in
Surrey, British Columbia, a suburban municipality near Vancouver, is a landmark C$26 million
project originally conceived by the provincial government as a community revitalization
initiative. In 1999, Surrey-based private sector developer Central City acquired the former Surrey
Place Mall, a 626,000-square-foot enclosed center anchored by Zellers and Sears, and created an
860,000-square-foot office structure next to the shopping center.

The new building, completed in 2003, is only 20 percent occupied at present, though a majority
of its space was recently leased to Simon Fraser University and business and government
tenants. The office presence has already produced dramatic results for the mall, now known as
Central City, say executives.

“The center was underperforming and we’re turning that around,” said Paul Reilly, president of
Central City. “You can see the new demand for retail space.” New tenancies will occupy 100,000
square feet of GLA this year, among them a supermarket, specialty retailers and a Best Buy store
in a new freestanding box. Sales per square foot climbed 5.2 percent in 2004 compared with
2003, Reilly reports, and he anticipates a much greater increase once the remaining 80 percent of
office space is filled.
In short, mixing uses, like drinks, can make for a potent brew.

EMERGENCE OF MIXED USE RETAIL FORMATS

There is no basis for the fear that malls in India will lose their status as shopping and
entertainment hubs now that many mall developers are offering space to hotels and offices. The
fact is, this is not affecting the overall mall experience of the customer, since in most cases there
are separate entries for the hotel/commercial component and the retail part.

The reason why mall developers are nowoffering space to hotels has more to do with the floor
space index (FSI) and less with utility. In the case of retail, food, entertainment and multiplex, it
is not always possible to utilise the complete FSI of the plot.

The concept of mixed-use development with retail, entertainment, shopping and accommodation
all under one roof helps diversify the tenant mix in the total construction, and also de-risks the
developer¡¯s investment. It also allows the developers to utilise the FSI and location.

Such developments leverage on the location and provide multiple solutions under one canopy.

Mixed-use developments have evolved to increase the viability of projects and to utilise the
location advantage. Residential and office markets are witnessing buoyant growth and are
considered as relatively more risk-free development.

A new concept which is also evolving, particularly due to FSI norms, is serviced apartments as
an offering within mixed-use developments.

Malls have a good reason to give space to hotels or office complexes:

¡ñ It increases the viability of project and de-risks it;

¡ñ It helps utilise available FSI optimally;

¡ñ It makes the usage relatively more diverse¡ªin some cases mixed use is the best use for real
estate development; and

¡ñ It fits with floor plate sizes. Retail historically does not work on more than three floors.

There are already examples of existing and upcoming projects where shopping, entertainment,
residential and retail co-exist with office space. The existing ones include Treasure Island at
Indore, Inorbit Mall at Vashi, and the upcoming ones include Nirmal Lifestyle, Market City
Projects, Phoenix Mills, Express Mall Chennai and DB Mall at Bhopal.
Upcoming mallswhich have a proposed metro station within or parallel to their projects are
expected to draw in considerable footfalls, reflecting positively on retailer¡¯s sales. An example
would be Mantri Square in Bangalore.

Internationally, mixed use developments have been used to form the social fabric and have done
well.

Mixed-use developments create a captive catchment for the retailers and other components. The
model is fairly successful in both metro and Tier I cities. In fact, in...the light of changing retail
dynamics, the response for such projects in Tier-II cities has also been encouraging.

Advantages of mixed use developments to retailers:

¡ñThey add captive foot falls;

¡ñ Food and impulse item sales increase;

¡ñThey generate a wholesome social fabric and create destination developments; and

¡ñ In some cases, mixed use developments can also help decrease the base rental and increase
revenue for developers who operate on a revenue share model, which also increases feasibility
for retailers.

Disadvantages to retailers:

If the customer flow is not properly designed and enough parking space is not available, a
mixed-use project can result in a bad experience for customers, with obvious negative
repercussions on the entire development.