When the 28-acre mixed-use Hudson Yards opened in New York City this past March, many heard the term “megadevelopment” for the first time. The behemoth $25 billion project — home to luxury retail, residential and office offerings, with a public plaza anchored by an acclaimed interactive sculpture — is the nation’s largest private real estate development. When completed in 2024, it will house 16 structures and include a new school.
Hudson Yards is far from alone in bringing a massive real estate development to life. In downtown Nashville, Los Angeles-based CIM planned The Gulch for a 15-city-block area with between 7 and 12 million square feet of new construction, including new streets and parks. In Philadelphia, Drexel University-Brandywine Realty Trust is transforming 14 acres with eight high-rises totaling 6.9 million square feet into Schuylkill Yards. And in my home base of Chicago, six megadevelopments are in some stage of development despite economic uncertainty here and nationally.
There’s no definition yet of how big a development must be to qualify for mega status, but the consensus is that it must have enough mixed uses to resemble a neighborhood. Chicago’s Lincoln Yards and The 78 megadevelopments will essentially create cities within a city.
Changing Demographics And Psychographics Are Spurring Megadevelopments
However, the timing seems ironic. In recent years, “super-sized” has seemed to lose cachet. McMansions have given way to smaller dwellings that better suit millennials’ wallets, distaste for too much stuff and desire to travel, as well as baby boomers’ efforts to downsize. Interest in walkability, which suggests traversing smaller rather than mega-distances, became the mantra of every cohort for healthfulness, time efficiency and community. People also crave more intimate connections as they worry about the negative impact isolation might have, in part due to the panoply of tech tools.
Yet, despite such influences, convenience has come to trump all and is a major reason for the emergence of megadevelopments. Americans of all ages and demographic levels covet easy access to live, work, play and service options. And big projects are a great way for developers to maximize land, resources and ROI by bringing new housing, parks, offices and infrastructure to otherwise vacant sites and reimagining and redeveloping depressed areas.
Megadevelopments are also a way to differentiate properties from the competition, as amenities have in the past. They’re also a way to diminish risk by appealing to all demographics and real estate niches rather than zeroing in on one cohort or one category such as commercial, residential, retail or hospitality.
Five Issues To Know About Megadevelopments
So, what does the rise of the megadevelopment mean for developers as they plan, build and market these sites? Succeeding with these big, expensive, time-consuming projects requires understanding key essentials, which are different than what smaller, niche-oriented developments have required in the past.
Plan strategically: Few cities have mega-sites readily available, so cobbling together land requires greater patience and dollars than it does to buy several blocks. The best locations lie near transportation and attractions, whether outside major cities along transit routes or in city centers. In urban areas it may take years to assemble land, as was the case for Hudson Yards. Or it may take foresight to envision what open land can become, as was the case with Metropica, the suburban Florida development my company represents for condo sales. Thirty-one miles from mature, expensive Miami and near the state’s No. 2 tourist attraction, Sawgrass Mills Mall, the 65-acre mixed-use megaproject includes eight residential towers, hotels, retail and a range of amenities.
Understand the viability of mega-economics: Although the Urban Land Institute’s 2019 “Emerging Trends in Real Estate” report noted the real estate market reflects uncertainty and rising construction costs, megadevelopments counter some of those challenges with their economies of scale, ability to bring life to vacant infill parcels and 18-hour city models with amenities that lead to economic growth. Sometimes, the megadevelopment might need to be built away from an urban hub due to availability of land and cost. If there’s enough variety, the adage “If you build it, they will come” will apply.
Create a realistic and astutely timed master plan: Once land is secured, a master plan must factor in the need for multiple mixed uses — residential structures, office buildings, hotels, shopping mall, cultural facilities, gardens, wellness facilities, schools and parking — at different price points to help draw traffic and sales long-term and cut travel time, a priority of many. Specific choices need to mine analytics and psychographics of the targeted groups. And buildings must be spaced carefully to blur lines between live, work, play and services. Because these projects take years to complete, it’s important to deliver some services once residences or offices are open, just as it’s vital to have some residences and offices available once services are provided.
Embed megadevelopments with authenticity: Super-sized projects — especially those that target multiple cohorts — can lack authenticity. For example, in one megadevelopment in our portfolio, each residential tower is planned to have a different demographic audience, yet all will sport identical exterior facades and their own amenities. Each residence must be differentiated through placemaking, design and programming.
Market megadevelopments mindfully: Thanks to their size and complexity, these super-sized projects are sophisticated. Developers make the mistake that consumers “get it” and understand the full scope of offerings in the project. But in my experience, they don’t. And at the same time, developers must market to multiple audiences to fill and sustain commercial, retail and residential properties. Developers will be served best by marketing strategies that are holistic, data-driven, creative and tenacious.