Mixed-used development is all the current rage in the real estate market. During the dotcom boom, we had the McMansions to drive the interest-only lending market, then we had townhomes crammed into small patch of land to sell credit default swaps and we had commercial retail strip malls with a Subway being built everywhere for the same purpose to create REIT. Then the real estate bubble burst around 2008 and if you go to a suburb like Gwinnett County here in Atlanta, Georgia, you be looking at nothing but empty strip malls with empty storefronts all over the place. So real estate developers now have a new trick they want to employ and that is combining both commercial and residential into an urban styled cluster called mixed-used development.
What Is a Mixed-Used Development?
According to Wikipedia: Mixed-use development is—in a broad sense—any urban, suburban or village development, or even a single building, that blends a combination of residential, commercial, cultural, institutional, or industrial uses, where those functions are physically and functionally integrated, and that provides pedestrian connections.
So a mixed-use development purpose is try to create an urban economic cluster by having a density of people in an area they can shop and live at. But there are several types of mixed-use developments and let’s look at the different kinds.
Retailing and Residential. This is the most common format done in America where there are retail shops at the bottom level with residential units sitting above in a hi-rise or loft setting. These usually are designed to mimic the “main street” feel of a small town and the goal is to bring in commercial retail tenants with brand names or one of those franchise models you read about in those franchise magazines.
Residential and Industrial. This is done in Asia and cheap labor nations where workers live in a dorm setting and live on the work site to create cheap products to sell in American big box retail stores. Conditions are less than idea and there is usually a “boss” who have control over residential lives in terms of showing up to work and how they spend their time. A good historical example is the oil boom town and coal mining towns.
Sector and Residential. The residents in this setup are usually entrepreneurial and the commercial space is reserved for entrepreneurs to launch startup ventures. So for example, a bunch of financial technology entrepreneurs and those that want to work in the industry migrate to this area to work on financial technology startups. This is a strategy to attract talent to a central area and being done in emerging urban markets around the world such as Bangalore, Singapore and London and throughout Africa.
Now here is a question – which mixed-used do you think is actually the most profitable? Is it the sweatshop dorm in China with global contracts to manufacture a billion mobile phones within the next 8 weeks? Is it the tech sector hub mixed-used development creating tech entrepreneurs and an economic hub increasing home values, attract bigger businesses and increase the local tax revenue? Or is it the residential and commercial shopping mix-use development full of residents who supposed to just live there, maybe go jogging then shop at the hipster boutiques at the bottom level? Yeah, American real estate developers have went with the hipster shopping commercial / residential option and that’s why we want to talk about HIPPO here.
Understanding HIPPO
HIPPO means highest paid person opinion or highest positioned person opinion and this is a problem we see throughout America and many urban nations thanks to media propaganda by white privilege publications like Forbes and the Wall Street Journal. The line of thinking around HIPPO is the person making the most money is the smartest person in the room who can make the right decisions and the decision we all have to agree with. This is why you see Presidential candidates like Ross Perot and Donald Trump running for office and get the support they get or people fall in love with the Koch brothers and their opinion on how a billionaire thinks the country and government should be run.
One of the best HIPPO trends going on is corporate “innovation/incubator” centers where some executive have the bright idea to bring “Silicon Valley” to their corporate environment and try to mimic a startup culture in their corporation hiring under 30 years old hipster whites and Asians (maybe 1-2 blacks to portray diversity – one has to be a black woman) to invent innovation within their firm. Never mind all the other experienced people at the corporation with 10-20 years of experience working the industry and knowing the current business workflow and know the pain points and improvement paths – the corporate executive believe through HIPPO they can create the best direction of the firm because they are in the top position and go out and create some innovation lab with a cool office space to show off to vendors and stakeholders – this is being done everywhere now and it’s kind of pathetic. This is the best example of HIPPO that will eventually fail like the 2000 era HIPPO idea of outsourcing all of IT to India – the corporations are quietly bringing IT back to the USA as they quietly admitting failure on that one.
In the African-American community, we see HIPPO running rampant throughout our culture and why we brothas and sistas are so messed up. Brothas and sistas want to badly believe a major urban drug dealer or a ball player or mega church preacher or someone who appear on TV has the best opinion on a subject or topic. Like any statement Tyler Perry make is 100% right and cannot be challenged, real talk. You will see an ignorant African-American say TD Jakes is always correct, or some rich black person know what they talking about because they have a lot of money. Or say Magic Johnson is an inner city black entrepreneur because they liked the old school Lakers. Or say Rev. Al Sharpton is our black leader because he has a TV show and radio show. The worst example of HIPPO in the African-American community is Black Enterprise magazine, a declining and irrelevant magazine choosing to centered their content strategy on promoting the idea of HIPPO believing Reginald Lewis or their BE 100 nonsense is better to talk about than the Great Migration family who moved from Alabama to Baltimore and started a chain of dry cleaners, laundromats and medical centers for the black community and stayed low profile.
Then you have mainstream media like CNBC that promote the idea that only a rich person who are financially success should have a platform to voice their opinion like CNBC used to do with that one guy named Jack Welch, some guy who used to run GE or whatever. And when you question these guys, the first thing people on the sideline will say is they made a billion dollars and when you can make a billion dollars then you will have an opinion they care about. That is the HIPPO stuff you see Americans are about.
HIPPO is flawed because it is based on perceived financial success with no context. For example, having blind acceptance of an opinion from billionaire mogul who had rich parents and never ate from a paper plate in their entire privileged life. HIPPO does not take in the experience from all participants which create a diversity of insights to understand a situation. For example, you have white male privilege culture in Silicon Valley who never lived in an urban community considering themselves experts in mobile payments and small format retailing in urban markets. Poor people been using cashless transactions for decades and the guy selling used TVs in the hood know what the local community wants already. And for mixed-used development, we have architects and developers who design these communities in a way where it is obvious they never lived in one of these types of units growing up and the lack of insight reveals itself in the worse ways after these mix-used developments are built.
Risks of Mix-Used Development
America current craze for mix-use developments attempt to adopt patterns and practices from high-density urban zones by trying to create a “fishbowl” hub of hi-rise apartments/condos with retailing establishments below and a few amenities. The thing is if you are trying to create a miniature urban area, then you have to be prepared to deal with miniature urban problems. Even in the Wild West days, someone built a settlement town and you still saw issues with the saloon and bank robberies and I played several hours of Red Dead Redemption to know what I’m talking about.
So mix use developments want to build high-density buildings but can they handle the micro-society and micro-urban problems that come with the territory? Here is what real-world experience tell us what happens with mix-use developments.
Not Near Public Transportation. This is a major problem because the Millennials is now going to see dozen of job changes over time. If the mix-used development is just renting, that means vacancies are going to be common due to migrating residents instead of long term residents. In addition, transportation cost are more expensive due to having to own an auto then pay for auto insurance in addition to the expensive rent. If a gas shock occur, this will make life harder on those residents real fast and we saw this happen in many older mix-use developments.
Massive Car Break-Ins. Due to mix-use developments having huge parking structures that warehouse autos to a slot, car thieves are having a joyous time smashing car windows and now operate in flash mob crews that can smash windows and break in 20-30 cars in under 15 minutes looking for something to steal and leave quickly. This type of crime wave is not possible with true urban area street parking but now very possible with these car garages in these high-density mix use developments.
Extreme Home Invasions. You ever noticed something about a main entry door of a mix-use development? Notice how easy it is to kick in one? Oh, I’m pretty sure the alarm will go off and the neighbors will hear but if a crew is outside in the hallway, what neighbor of yours is going to open their door? The way those hallways are setup to be linear, you have to peek your head out from your door to see what going on and you expose your head and face to the situation out there. Police can be called but don’t rely too much on them – they have other mix-use developments to attend to as criminals get smarter and realize they can operate in parallel distracting cops go to one mix-use development to protect the citizens while the criminals make a move in another mix-use development. Criminals kicking in mix-use development apartment doors and ransacking the place and make it look like a moving stuff out operation will not be hard due to the fact none of the residents really know each other as people move in and out all the time.
Loud Noise and Loitering. People want to hang out and gossip and teens want to hang out also like in any urban area. The teens want their spot to talk about having sex and doing drugs and singles want their spot to mingle and party and the adults want their spot to relax – that is urban culture. So what happens is you hear a lot of loud noise at night or when a college football game is running and you see teenagers hanging in the stairwell and notice the 14 year old girl with a two-piece outfit of a mini-skirt and tube top and red lipstick talking to a 37 year old man smiling talking to her as you walk to your car or headed to your jogging run. Or people walking past your front door at 10:30pm at night talking loud.
Drug Dealing in Those Halls. The drug dealers love to setup shop. You will see them sitting in their car in the parking garage all day or see them lurking in the swimming pool area all day. Anything from steroids being sold at the fitness club section to the recreational stuff at the swimming pool, the dealers love to claim those “towers” as territory like Avon Barksdale in HBO The Wire. The police can come in but someone else like Marlo will come along and setup shop in those towers the next month. Once again, the residents who are not urban will not be able to handle this dynamic and because this is an apartment mix-use, will just break their lease.
Compromised Culture. No local church, no local community center and most of all, no ethnicity. It’s going to be one of those community where everybody try not to offend the other ethnic group and compromise their own belief and culture. Muslim women will get fake names and not wear a burka, black people will not listen to rap music all loud with the bass turned up but it will be socially okay for white Americans to play Lee Greenwood Proud to be an American over and over as loud as they want. So what you see like any other suburb, on the weekend everybody disappear from the place and no local community is setup and kids don’t get to grow up with friends from the same community as these are apartments. They only see each other being bussed to the mega school complex.
So as you see, the attempt to create mix-use developments as sanitized micro-urban center or town center will not work out as expected and will create more problems if HIPPO is the only decision maker in the room. The HIPPO guy and his grandiose vision of a mix-use development will quickly turn the place into a high-density ghetto that the police have to be called to investigate over and over. Even worse than a ghetto is no one know each other – in the hood, I know the kids growing up and we still in touch with each other. So HIPPO-led developments being sold to council members with kickbacks just doesn’t make sense. Sounds to me in America, someone will just copy and paste a mix-use development, build it and take the money and then run and sell the mix-use development hustle to the next suburb like that Monorail salesperson from that Simpsons episode.
Seeking Diverse Opinions versus HIPPO
The obvious thing people will say is there are local council meetings that take the public input before developing anything in the community. You see how people get outrageous over big box stores trying to build in their local community bringing in extra traffic and extra people and trucks and stuff but you don’t see that same local community outrage about mix-use development projects which I would think would bring a lot more drama than a big box peddling cheaper mass produced items putting local merchants out of business.
But here is the thing – business development should not be about corporations fighting or manipulating the locals or regular folks to build or develop anything. This should be about the business understanding that a diversity of opinions from everywhere should override ego and self-interest for true success and long term progress and growth. For example, African-Americans lived in high-density urban communities for generations as well as many Asians in Asian cities like Taipei. To totally ignore and not reach out to urban-living African-Americans to understand the personal ramifications of urban living is just ignorant and typical of white privilege driven American businesses. How much you want to bet if I read any feasibility study (if there is one) on creating mix-used developments, there will be zero references to high-density urban centers or any input from residents who actually lived there and can discuss the pros and cons that can be applied as patterns and practices to mix-use developments?
If you are starting a business or a venture or an initiative, you need to avoid the HIPPO approach and take in every opinion and fact and capture it to know the real landscape and what is at stake. The opinion of those that are everyday people is just as important as those in a position of power and influence. Here at Dream and Hustle, no one in Silicon Valley taught us about QR code, contactless payments, omni-channel, NFC and urbanization – we learned all of that from looking at global patterns and practices from Tokyo to London and adopted it to present as solutions to the African-American community. And I never mentioned here what billionaire Bob Johnson from BET thought about anything because I can care nothing about what Bob Johnson thinks of anything, I focus on real-world patterns and practices for any business development or initiative I take on.
If you are looking to pursue mix-use development and create a micro-urban cluster or present any urban solution, you have to talk to the people on the ground as well as the developers and investors and local governments and get everybody opinions. Here is what I would have done before even starting on a mix-use development project.
Go Immerse in an Urban Area. I would immerse myself in New York or Chicago or Boston where there is a talent pool and true high density lifestyle going on. Some people go live in Kuala Lumpur or Tokyo also and London and these are just as good. The goal is to understand urban if you are going to claim to create solutions that are urban-based. I recommend Tokyo for being a mature urban center and just an overload of urban innovation and concept.
Establish a Panel of People Who Live It. This is getting with people who live in the urban community all their lives and just have a fireside chat about their life and experience. Let them tell their story. I actually watch a lot of classic urban Tokyo and various European films that are urban-based to understand how life was like and capture information that modern films do not touch on. Modern Korean drama films have good urban background told in their stories also. But try to talk to everyday people and understand what their life is like and their needs. I heard Lowe’s built a small format store in Manhattan but I also remember a hood hardware store growing up around me that sold door hinges and door knobs and locks and wood and had everything you can fix up a Greystone or Brownstone – he even knew my dad and our house and what screws we needed. Now have anybody talked to him or tried to get his expertise on urban small format hardware retailing? Or did Lowe’s created some HIPPO omni-channel mobile driven hologram stuff? That’s the point I’m trying to drive here.
Gather Information from Hipsters Who Never Lived It. The purpose is to understand quickly what concepts or features go into the hipster category of your business model. Hipsters may have cool ideas about creating a community garden in a mix-use development but you are smart enough to understand the Tragedy of the Commons and develop your own solution to rent outdoor garden boxes or an enclosed greenhouse in addition to an apartment for residents that want to grow their own garden instead of feeling coup up. Or create a cat café common area in the mix-use development as a home to abandoned stray cats loitering and leaving half-eaten dead birds and dead rats everywhere. I had a stray cat that loved me so much it would leave a partially eaten dead bird or dead rat at my front door every time I opened it as a display of love.
Learn from Law Enforcement Who Worked Urban Areas. Pay the cops a consulting fee to talk to you about crimes and weird stuff and what could be done to avoid these issues in the future. Cops are also an ignored resource to understand the risks and problems that they see that other people don’t even bother to consult them on. Where they find bodies or where victims are attacked and how criminals operate and congregate at is good intelligence to gather and know.
Hear from Politicians Serving Urban Areas. There are two types of politicians you want to gather information from. You want to hear from the former elected politicians who have experience on how to proceed on projects and cut through the red tape. But more important, you want to hear from those that ran for office but did not win because you want to hear their story of what they wanted to solve running for office in an urban community and their platform based on their firsthand experience of urban problems and proposed solutions.
Your competitive advantage in America (and China and Japan) as an entrepreneur is your ability to gather the best competitive intelligence and backgrounder for your business model. This information can be used not only for decision making but for your marketing. Imagine if an African-American developer who grew up from the inner city establish a mix-use development and not only talk about the features but profile the opinion of urban law enforcement reports of problems, politicians goals of solving urban problems and local community members grievances and that entrepreneur then go to describe how they listened to those problems and describe their business solution to those problems in their mix-use development approach. Meanwhile, the other mix-use development guys are saying “Come on buddy, I’m rich! I know what I’m talking about!” as their strategy to convince others to buy in.
How to Improve Mix-Used Developments
Not only have I looked at urban patterns and practices worldwide, I grew up in hood in the housing projects and in urban communities and visited plenty of family and girlfriends in those hi-rise projects growing up in Chicago. I have found Asia to be a better adoption model than the mix-use development patterns from Europe. Personally with me, I rather see residential and industrial mix use projects developed in Africa and Latin America and in American cities than the residential and shopping mix use developments. For the suburbs in America, I rather see residential and sector-based mix use development that focus on fintech or startup culture than residential and shopping. I don’t know why anybody is building residential and shopping mix use development in this day and age after all the open vacancies we got around after the fallout from building a strip mall every half mile that is still empty to this day.
Here are my top suggestions for mix-use development improvement.
Night Markets. Yes, I love night markets and nobody is going to shut me up on keep proposing it as a solution. Night markets help turn local residents into entrepreneurs and also teach children about entrepreneurship and bringing things to market and selling. And night markets make an urban community safer by having people out and about. Crime of opportunity occur when there are few people out late at night in urban areas and that is why you see smash and grab videos on YouTube and the criminals got away because no one was around to witness anything.
Co-Working Space. Create a co-working space for residents (and non-residents) to work remotely or engaged in entrepreneurial activity. They can rent an office or meeting room or cubicle and use the office equipment like fax machine or copier to do business moves. Or mail out their stuff they selling on Amazon or eBay. The residents need to earn money to pay rent and live a life and carry out their passion so create the environment for ambitious residents to thrive and want to be there.
Culture-Specific. Try to focus on local culture instead of trying to play the culture-neutral role that will never work out the way it should. Have places of worship nearby, focus on creating areas for kids to play soccer if that is their background and so on. Do not make the place neutral where culture clashes start to manifest and teenagers find stupid things to do when there are no productive things to do.
Screen Doors on all Apartment Doors. A screen door is the best protection and deterrent against home invasions. It take a while to fiddle with a screen door alerting others quicker and giving the homeowner more time to be alert and react to someone fiddling with their screen door. Also, when someone knock on the door, a screen door gives an extra layer of protection instead of just that door chain to see who is knocking when the door is opened.
Public Transportation or Access to Transportation. If the mix-use development is not near public transportation, then space should be reserved for ride sharing services and also car sharing services like Zipcar. If I ran the mix-use development, I would buy my own fleet of 5 autos that can be rented by residents and use that as a revenue stream.
Micro-Manufacturing. No one can deny the power of China with dorms and manufacturing facilities nearby to churn out billions of products for the global economy. A good mix-use development would latch onto a manufacturing sector and incorporate it nearby such as a craft beer manufacturing facility or shared kitchen or apparel manufacturing shop to attract a hub of talent and upstarts to use the facilities and have talent nearby to start companies as a “garage operation” and branch out in the same community for growth – kinda like how Silicon Valley branched out from garages to corporate offices in the Bay Area.
Take-Away
While this article is about mix-use development, the overall conversation is about avoiding the HIPPO flaw that many people believe in as the solution channel to problems and taking advantage of opportunities. I would strongly recommend everybody to stop reading HIPPO-orientated crap like Forbes and the Wall Street Journal commentary and CNBC where CNBC propped up so many people doing prison time for fraud promoting HIPPO on CNBC. Now CNBC running some American Greed program knowing they were the one giving most of these fraudsters a platform on their cable network.
Instead, learn to look for global pattern and practices and get a diversity of input and opinions from everybody who live, manage and vision the problems and solutions of your business model. What is more important is experience than the vision or the money. You will gain a competitive advantage knowing all of the parties engage in both your vision statement as well as selling the solution by showing you are more thorough than your competitors.
Mix-used development is delicate like a small aquarium. It is easier to manage a large aquarium than a micro-aquarium because you have to be sensitive to the ecosystem and giving the aquatic life room to live and thrive and feel safe. I believe mix-use development have strong opportunities but the American market focus on HIPPO too much and allow rich tycoon developers to build them and run off and the local county is stuck with the crime and problems of that mix use development sucking up all the water and power grid and police and fire resources with transitional tenants.
In the African-American community, let’s stop the whole HIPPO practice perpetuated by Black Enterprise magazine and instead listen to everybody around us and get a diversity of input and opinions to base solid business models and initiatives. I don’t care about what some rich African-American think, I care what the untold story of the lady who ran a laundromat for 15 years in the black community and her day-to-day experience. Let’s stop this “first black person” or “this kid sold millions in bowties” inspirational/motivation crap and let’s focus on why someone succeeded and why someone failed and get the hood opinion and just get all sides and angles so we can go into the world fully prepared and ready to go and get ours as we build these empires.