Master-Planned Communities Are Evolving

Pierotti: “One of the significant challenges faced by a master-planned community developer is building in sufficient flexibility to address changing market demands that may occur over the build-out period of the community.”

COSTA MESA, CA—Still a key land-use planning tool today as much as they were a decade ago, master-planned communities are now offering high-density residential as one of the components, Anthony Pierotti , a partner in the real estate group at law firm Haynes and Boone LLP , tells GlobeSt.com. Pierotti focuses on the acquisition, financing, development, management and sale of master-planned communities, office buildings, medical facilities and retail and industrial properties. He also negotiates joint-venture arrangements for both development partners and capital partners and advises clients on large debt -financing transactions involving multiple real estate projects. We spoke exclusively with Pierotti about some of the challenges developers of master-planned communities face today and how they are changing for the future. GlobeSt.com: What do you feel the place of master-planned communities is today vs. a decade ago? Pierotti: Master-planned communities remain a key land use planning tool today as much as they were a decade ago. In many areas of the country, two or three generations of some families have lived in master-planned communities and have grown accustomed to the unified feel, amenities and other features of such communities. However, in some areas, such as Southern California, opportunities for new master-planned communities are becoming more limited in both scope and number as the supply of land available for development drops over time. GlobeSt.com: What are some of the challenges developers of master-planned communities face today? Pierotti: One of the significant challenges faced by a master-planned community developer is building in sufficient flexibility to address changing market demands that may occur over the build-out period of the community. It is risky and costly to later need to seek further discretionary approvals for things such as use or density changes, and to the extent flexibility can be incorporated up front through appropriate provisions in a development agreement, specific plan or other entitlements, the concerns on this issue can be reduced but not really eliminated. There are a host of other challenges as well, many of which depend on the location and size of the master planned community. In many places, water availability is an issue, and addressing matters such as use of reclaimed water and drought-tolerant landscaping are key. Addressing traffic and mass transit issues are as important as ever, and including a live/work component in the community is more important than ever.  Changing demographics continue to have a significant impact, including the aging Boomer population looking for active adult living in a community close to other generations of their family, as well as the growing trend of multigenerational living. GlobeSt.com: Why are master-planned communities still viable in an era where density and apartment living are so strong? Pierotti: Assuming the master planned community is of sufficient size, it will typically have multiple residential components, including high-density residential. The high-density residential may include for sale product (such as condominiums ) or for rent product (such as apartments ). High-density components in a master-planned community may be more attractive to residents given the proximity and availability of master-planned community amenities, which may not be available in stand-alone high-density projects, such as community gardens and community fitness facilities. GlobeSt.com: What else should our readers know about master-planned communities? Pierotti: Master-planned communities are here to stay, but have to evolve to meet ever-changing demographics and the needs of prospective and existing residents. Trends to watch include how new master-planned communities will address the 55-plus market, which is expected to grow significantly over the next 10 years, and the place of affordable housing as housing becomes more expensive and considerations are given to whether in-lieu affordable housing fees or actual dedicated affordable-housing units should be required in connection with a project. With developers leveraging development and redevelopment opportunities across all property types, how can you capitalize on this activity?  Join us  at RealShare Orange County on August 16^th for impactful information from the leaders in Orange County CRE. Learn  more .