The first shopping center I helped reposition opened in 1989 as an enclosed regional mall. Three department-store anchors. A food court. A movie theater. The kind of asset every regional REIT owned a dozen of through the 1990s. By 2015 it was structurally distressed. By 2018 two of the three anchors were dark. In 2026 it is the highest-performing single asset on a portfolio of 14 retail-anchored properties I help run.
The asset didn’t change locations. It changed shape. The enclosed corridors opened up. The dead department-store boxes became residential, medical, and civic space. The food court became a chef-driven dining hall. The surface parking on the east side became a 240-key boutique hotel. The west side became 280 apartments above ground-floor specialty retail. A medical-office anchor moved into the second floor of one of the converted anchor boxes. A coworking operator took the second floor of another.
What used to be a regional mall is now a 1,200,000-square-foot mixed-use destination with seven distinct programmatic uses. Net operating income per square foot has roughly doubled against the 2018 baseline. Occupancy is stable above 92 percent. The asset trades on a different cap rate than its 2018 self because it carries a different risk profile entirely.
This is what mixed-use is doing to American real estate. Office has stagnated. Class B retail has compressed. Mixed-use has absorbed both. The institutional money is moving accordingly. This piece is about what the macro looks like, what’s structurally different about operating mixed-use, and where the underrated edge actually lives.
The macro story.
Office has had a difficult decade. JLL US Office Outlook (JLL Research, 2025) shows national office vacancy at 21.5 percent — historically the highest reading the series has produced. CBRE Research confirms the trend. The Class B office category bears the bulk of the vacancy; Class A trophy product in primary markets is meaningfully tighter, with some submarkets approaching pre-pandemic vacancy levels.
Mixed-use has not had the same decade. ULI’s Emerging Trends in Real Estate (Urban Land Institute, 2024–2025) reports through 2024 and 2025 show mixed-use development consistently in the top three property-type prospects, alongside industrial and select alternative-housing categories. The institutional capital flows confirm. Roughly 30 percent of US institutional CRE acquisition activity in 2024 went to assets the buyers classified as mixed-use, up from roughly 18 percent in 2019.
What’s actually happening: the trips that used to go to the office aren’t all coming back, but the trips that used to be distributed across single-use districts — office for work, separate residential districts for living, separate retail districts for shopping, separate entertainment districts — are increasingly consolidating into walkable mixed-use destinations. Office hasn’t disappeared. It’s relocating into mixed-use envelopes that also contain residential, retail, hospitality, and civic uses.
The structural argument was made well before the pandemic. Christopher Leinberger’s The Option of Urbanism (Leinberger, 2008, Island Press) and his subsequent updates predicted the demand shift toward walkable urban places. Cornell SC Johnson’s Center for Real Estate and Finance (Cornell SCJ CB) has carried the more recent academic torch on the operational economics. The pandemic accelerated a trend that was already in motion.
What changed.
Three things changed, in roughly this order.
Hybrid work made the standalone suburban office obsolete for most institutional tenants. The single-use suburban office park, with no walkable retail and no residential within fifteen minutes’ drive, lost its labor-market draw. Mixed-use environments that offered an office presence as one of multiple uses retained their draw.
Residential conversion of distressed office became economically credible. The math is hard, the entitlement is harder, but the trend is real. The Urban Institute and Brookings have documented the wave. Cities have responded with zoning reform — sometimes substantial, sometimes cosmetic — to enable the conversion.
The “15-minute neighborhood” concept moved from European urbanism theory to American development underwrite. Carlos Moreno’s framing, originally for Paris, became the default planning vocabulary for new master-planned communities in the US between 2020 and 2024. The tenant demand has followed. The development underwrite has followed the tenant demand.
What I sometimes hear is “mixed-use is a 2010 idea repackaged.” That’s not quite right. The 2010 mixed-use product was usually a single building with retail at the ground floor and apartments above. The 2026 mixed-use product is a district-scale composition with five to ten distinct uses across multiple buildings, programmed and operated as a single destination. The shift is from building-level mixed-use to district-level mixed-use.
Why mixed-use is structurally different to operate.
This is where the economics get interesting and where the operating skill makes the trade.
A pure-play office tower has one operating model. The asset opens at 7 a.m., closes at 7 p.m., serves a single tenant cohort, and runs on a relatively narrow service envelope. A pure-play residential complex has one operating model: 24/7, residential service standards, residential vendor mix. A pure-play retail center has its own. Each is well understood; each has a mature playbook.
A district-scale mixed-use destination runs five or six operating models at once. The hotel runs on hospitality standards. The residential runs on multifamily standards. The retail runs on retail-anchored-center standards. The office runs on office standards. The civic and programming functions run on event-operations standards. The hospitality F&B runs on independent-restaurant standards.
These models do not share vendors, service-level expectations, capital-expense cadences, or customer touch-points. The operational coordination required to run them in a single physical envelope, in a way that all six users experience as one coherent destination, is meaningfully more complex than running any one of them alone.
This is a coordination problem before it is a real-estate problem. It is also why the operating margins on a well-run mixed-use destination are noticeably better than the simple average of the operating margins of its individual uses. The coordination, when executed well, produces revenue that single-use operation can’t.
The revenue stack of a modern mixed-use destination.
Let me decompose where the money comes from on a modern mixed-use asset, because the line items are different from a single-use property and consultants often miss several.
Base rent across uses. Office, residential, retail, hospitality, medical. Each on its own lease structure, each with its own escalator profile, each with its own market-rent cycle. The blended rent-roll on a well-leased mixed-use destination is meaningfully more stable through cycle than any single-use rent-roll.
Parking. Mixed-use parking utilization is meaningfully higher than single-use parking utilization across the day. The office tenants pay during the workday, the retail during the afternoon-evening, the residential during nighttime and weekends, the hotel and event-driven traffic across all of it. Same physical asset, higher revenue per stall.
Events and programming. The programmed calendar on a modern mixed-use destination — concerts, farmers markets, public art installations, holiday events, corporate-rental events — drives material revenue and is one of the largest single contributors to retail-tenant percentage rent. The programming team is a real budget line. So is the revenue it generates.
Sponsorship. Naming rights, presenting partners for major programming, branded activations in public space, and longer-term commercial sponsorships are a non-trivial revenue category on the larger mixed-use destinations. Most institutional owners under-capture this.
Retail percentage rent. Anchored by foot traffic, anchored by programming, anchored by the residential and hospitality on-site customer base. Well-run mixed-use destinations consistently produce percentage rent meaningfully above mall benchmarks.
Virtual twin commerce. A new revenue category that did not exist five years ago. The destination’s digital interface — the app, the virtual twin, the loyalty program — generates measurable transaction revenue and sponsorship inventory of its own. This category is small today and growing.
Recurring digital yield. Connectivity-as-a-service, predictive operations savings, ESG-driven debt-cost compression, the kinds of returns described elsewhere in this series. Mixed-use is structurally easier to instrument as a single coherent platform than a portfolio of separated single-use assets.
Stack these correctly and a mixed-use destination’s revenue per leasable square foot can run 30 to 80 percent above the comparable single-use product. The stack is the trade.
The operator equation.
Mixed-use needs an operating layer that office never did. The reason is the coordination problem.
The office tower operator can run the asset on a 1998 BMS, a 2008 access-control system, and a 2018 visitor-management product, stitched together with manual processes. The customer experience is forgiving — most office tenants don’t really expect their building to act like a hospitality property.
The mixed-use destination operator can’t. The hotel customer’s experience is graded against the hotel’s brand standard. The residential resident’s experience is graded against multifamily expectations. The retail customer’s experience is graded against the centerline of competitive shopping. The office tenant’s experience is graded against the rising bar of hybrid-work-era flexibility. The civic visitor’s experience is graded against public-space standards.
Running all five at the standard each expects requires a different operating layer. This is where modern mixed-use destinations diverge from the previous generation, and where most under-performing assets fall behind. The destinations running on a coordinated operating platform — instrumented, AI-agent-assisted, single-pane-of-glass operations — meet the standards. The destinations running on stitched-together single-use playbooks don’t.
The operating layer is the constraint. It is also where the next decade of competitive differentiation will be earned.
The Cornell SHA hospitality lens.
The most useful disciplinary framework for thinking about mixed-use operations is hospitality. Cornell’s School of Hotel Administration developed the modern academic vocabulary for operating large-scale, multi-revenue-stream, customer-facing properties under a single brand standard. Most of that vocabulary applies to mixed-use destinations.
The concepts that transfer: yield management across multiple revenue streams. Service standardization across distinct touchpoints. Brand-standard compliance audited continuously. Loyalty programs that span product lines. Revenue management against demand-elastic capacity. The hospitality industry has been doing this for fifty years.
The concepts that don’t transfer cleanly: the binary occupied-versus-unoccupied logic of a hotel room does not match the long-term-leased logic of residential or office. The instantaneous-checkin-and-checkout cadence does not match the multi-year residential lease cycle.
The right disposition: borrow the hospitality playbook for the customer-experience and coordination layer, retain the existing playbook for the leasing-and-rent-roll layer, and instrument the asset comprehensively enough to optimize both at once. This is harder than it sounds. It is also the operator’s edge.
A real comp set.
Three mixed-use destinations from public filings worth studying, in increasing scale.
ULI case studies on the redevelopment of regional malls into mixed-use destinations document a recurring pattern. Net operating income per square foot post-redevelopment runs 1.6 to 2.3 times the pre-redevelopment baseline. Cap rates compress by 50 to 150 basis points. The capex required is meaningful — typically $80 to $180 per square foot of redevelopment investment — but the IRR profile is markedly better than alternatives.
The hospitality-anchored mixed-use destinations in primary US markets — projects with a credible 200-to-400-key hotel as one element among residential, retail, office, and civic — show similar economics. The hospitality anchor produces above-trend retail percentage rent. The residential produces stable cash flow. The office reduces seasonality. The civic and programming functions drive foot traffic that anchors the entire ecosystem.
The master-planned-community-scale mixed-use destinations — the projects spanning 200 to 2,000 acres with multiple use categories programmed into a coherent district — show the highest absolute returns when executed by sponsors with operational capability. The capital-markets pricing on these assets in 2025 was meaningfully tighter than on single-use assets of comparable quality.
The capital-markets view.
Two structural shifts in the capital-markets posture toward mixed-use are worth knowing.
Infrastructure-capital has begun bidding on the largest mixed-use destinations. Preqin data on real-estate-fund and infrastructure-fund overlap in mixed-use shows the convergence. The reason: a 1,000-acre master-planned mixed-use destination with a 50-year operating horizon has a return profile that looks more like core-plus infrastructure than traditional real estate. The infrastructure-capital cap-rate is meaningfully tighter than the real-estate-capital cap-rate. Assets that can be financed against the infrastructure-capital pool achieve different exit valuations than those that can’t.
Real-estate-fund-of-fund allocators have introduced explicit mixed-use category allocations in vehicles where previously the allocation was bundled into “diversified.” The category-level allocation produces, mechanically, more capital pursuing mixed-use product than five years ago. The pricing has responded.
For sponsors, the implication: the institutional bid on quality mixed-use product is thicker than on quality office product. The pricing has reflected this, with mixed-use cap rates compressing through 2024 and 2025 against office and Class B retail spread widening.
The 2030 mixed-use destination.
A sketch. By 2030, the prototype mixed-use destination at scale will look like this.
Eight to twelve distinct uses programmed into a single district envelope of 30 to 100 acres. Office representing 15 to 30 percent of leasable area, sized as a complement rather than the anchor. Residential representing 40 to 55 percent. Retail 10 to 20 percent. Hospitality 5 to 15 percent. Medical 5 to 10 percent. Civic and programmed public space as the connective tissue.
A single operating platform, instrumented across every system in every building. AI-agent-assisted dispatch, predictive maintenance, dynamic preconditioning, integrated tenant communications. A multi-stakeholder digital interface that presents itself differently to operators, tenants, residents, visitors, and ownership.
A revenue stack that includes base rent, parking, programming, sponsorship, percentage rent, virtual-twin commerce, recurring digital yield, and ESG-driven debt-cost compression. Net operating margin per square foot meaningfully above the comparable single-use product.
Documented digital performance against the framework convergence described elsewhere in this series. CRREM-pathway-compliant. GRESB-Performance-leading. Sustainability-linked debt at meaningful pricing tightness. SEC and CSRD ready, depending on the sponsor’s reporting structure.
This is not a vision document. Several of these assets exist in 2026. The number that exist will multiply through the decade. The sponsors that build the operating capability now will own the category.
The operator’s edge.
The most underrated advantage in commercial real estate in 2026 is operator capability on mixed-use product. The institutional bid is moving toward this category faster than the operator workforce can be trained to run it well.
The shortage is real. The premium on senior operators who genuinely understand the coordination of hospitality, residential, retail, office, and civic uses in a single envelope — and who can run the asset’s underlying operating platform with credibility — is real and rising. We covered the labor equation in detail in the operator-labor piece earlier in this series.
For sponsors, the implication is direct. The mixed-use thesis is a real-estate thesis. The execution is an operations thesis. Capital is increasingly available. Operating capability is the constraint.
For operators, the implication is also direct. The career path with the most leverage in the next decade runs through senior mixed-use operations, with credible technology fluency, at sponsors building this category. The skill is scarce. The market is paying for it.
Sources cited
- Urban Land Institute. Mixed-Use Development Handbook (current edition); Emerging Trends in Real Estate 2024–2025.
- JLL Research. (2025). US Office Outlook; Mixed-Use Capital Markets.
- CBRE Research. (2025). US MarketFlash and Capital Markets reports.
- Cornell SC Johnson College of Business. Center for Real Estate and Finance research papers.
- Cornell School of Hotel Administration. Hospitality Quarterly.
- ICSC (Innovating Commerce Serving Communities, formerly International Council of Shopping Centers). Mixed-Use Trends 2024–2025.
- Leinberger, C. (2008, updated through 2023). The Option of Urbanism: Investing in a New American Dream. Island Press; Foot Traffic Ahead series, Smart Growth America.
- Berube, A., & Kneebone, E. (2013). Confronting Suburban Poverty in America. Brookings Institution Press.
- Urban Institute. Converting Office to Residential research series.
- Brookings Institution. Hybrid Work and the Future of Cities series.
- Preqin. Real Estate Fund Strategy data on mixed-use vehicles, 2024–2025.
- CoStar Group. Mixed-Use Absorption and Performance Reports.
John Walker leads Mixed-Use Redevelopment at Smart City Labs and has spent 35 years in shopping-center operations and mixed-use redevelopment. To discuss mixed-use thesis at your portfolio level, talk to our team.