Study: Commercial development trending toward flex space, smaller stores

Commercial real estate in the Rocky Mountain West is moving away from the traditional mall and toward more flexible spaces with smaller store sizes, according to a new report by The Sonoran Institute, an organization that researches issues in western North America.

In the Rocky Mountain West, the report states, attitudes are changing about where to live, work, shop and play. Analysis of home sale prices in six western communities revealed an 18.5 percent price premium for homes in compact, walkable neighborhoods, according to the study, titled Restore: Commercial and Mixed-Use Development Trends in the Rocky Mountain West.

The two largest generational demographics nationwide are generation Y, born between 1982 and 2000 and baby boomers, born between 1946 and 1964, the study states. Those in generation Y are coming of age and establishing new households, and have strong preferences for shopping at locally owned stores that offer unique goods, according to the study.

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Baby boomers are reaching retirement age and are seeking shopping choices that are within a short distance from their homes to reduce dependence on cars, the study states.

These trends require new developments that are adaptable, flexible and convenient, according to the study.

Increases in online shopping have led to a reduced need for storage space in brick-and-mortar stores, and companies are downsizing the number of square feet per employee. Ten years ago, the standard office space required per employee was 250 square feet. That number has been reduced by 26 percent to 185 square feet, the study states.

Research for the study suggests that certain types of mixed-use development work better in certain areas, and that matching the appropriate type of development to the correct community is essential for creating a successful retail space.

Communities with large populations of young, educated people, significant population growth and high income, such as Fort Collins and Boulder, are best suited for vertical and horizontal mixed-use, lifestyle centers, historic urban mixed-use, main street commercial and “complete neighborhoods,” the study said.

Complete neighborhoods are those with many daily needs within walking distance of homes, according to the study.

Many of the commercial developments in the Rocky Mountain West represent the first generation of development on their respective sites, the study said. As these buildings reach the end of their life cycle, there will be opportunities to redevelop them into mixed-use developments by using market analysis, a proper mix of tenants, phased development and creative financing including public-private partnerships, the study said.