Uzbekistan’s Capital Transformation: Embracing a Tashkent Mixed-Use Urban Lifestyle

Tashkent is undergoing rapid transformation, with real estate playing a key role in these changes. The term “Multifunctional Complexes” (MFC) has emerged on the Tashkent property market. This term refers to a type of development that typically includes a variety of spaces: essential ones such as residential units, retail shops and offices, as well as optional spaces like entertainment venues, hotels, medical facilities and educational institutions. The configuration of a facility depends on its location, the level of competition in the surrounding area, the site size and purpose and overall market demand.

However, for many people outside the real estate market, the concept of mixed-use development can be confusing and often remains vague. Many assume it simply means a building with the lower floors dedicated to commercial use while the upper floors are residential.

According to the Urban Land Institute (ULI) handbook definition, mixed-use developments encompass three or more significant revenue-generating functions — such as retail spaces, business centers, apartments, hotels and entertainment or leisure facilities — that are mutually supportive. This format allows for more efficient use of the property, generating income from different segments within a single project.

Vertical and horizontal are two primary approaches to the design and planning of mixed-use projects. Vertical planning involves combining different segments within one building, such as having retail and office spaces on the lower floors and residential units on the upper floors. These projects are typically situated in central city areas, where land and prices are scarce. In contrast, horizontal planning positions all project components (housing, offices, retail spaces, etc.) across a more extensive territory within a single development, complete with shared infrastructure and landscaping.

Mixed-use complexes are most often in demand in city centers and business districts due to the high concentration of traffic, the presence of target audiences and convenient transportation accessibility, which makes them more attractive than developments in suburban areas.

From Boston to Tashkent

The first examples of this type of construction appeared in the 19th century, with Quincy Market in Boston (USA), built in 1824, being one of the earliest. This market served as a space for trade and social gatherings. In Western countries, mixed-use complexes have evolved through several stages, from basic designs to innovative concepts that meet market needs and trends and establish new standards.

Until recently, the property market in Tashkent was unfamiliar with modern mixed-use complexes. Notable projects in the capital include Nest One, Piramit, Modera Towers, Lot 3 in the Tashkent City cluster, Infinity, and others. However, it is still too early to say there is a strong trend towards building such complexes; they currently exist as individual projects rather than a cohesive movement. The size of these complexes varies significantly —from 50,000 square meters to the expansive 400,000 square meters announced by developers. The project’s composition and design depend on the specific characteristics of the site on which it is built.

Changes in consumer habits

Today’s home buyers have new demands. There is a growing trend for automation, ultra-fast delivery of goods from retailers, and a strong desire for local shops and services within walking distance. For the Millennial and Zoomer generations, access to walkable services, delivery automation, and convenient payment options are becoming more important than traditional retail formats. As a result, there is less need to travel to a store for planned purchases.

The pandemic in 2020 has also influenced work formats, making remote working a regular part of an office worker’s daily life, much like working in a physical office. These trends create attractive and versatile living spaces where office environments are prioritised, thus minimising travel time.

According to the 2023 Community and Transportation Preference Survey conducted by the National Association of Realtors (NAR) in the US, about six in ten residents in major cities are willing to pay more for a home in a walkable neighbourhood with a robust infrastructure. There is a clear correlation between generation and the willingness to pay extra for convenience and quick access. Approximately 90% of Generation Z and Millennials consider this an important factor, with a third willing to pay significantly more for housing in a walkable location. A similar survey conducted in 2019 found that the number of respondents visiting fitness centers and health and medical facilities in mixed-use development areas increased by 36%.

MFKs as a new standard of comfort

One of the key advantages of mixed-use complexes, at first glance, is convenience and quick access to services and facilities within walking distance. For urban residents, mixed-use complexes provide an opportunity to use services within one facility, which is important in areas with underdeveloped commercial infrastructure.

For a developer, the construction of mixed-use complexes becomes a way to diversify the risks associated with the sale of space in different formats. However, the success of such a strategy depends on the project concept, its competitive advantages and correct pricing. With competent design and professional management, each segment within a mixed-use complex can enhance the profitability of neighbouring segments, creating a synergetic effect.

Evgeny Grikhanov, director of CMWP management company, which provides management and operation of the landmark Nest One mixed-use complex – known as the tallest residential complex in Uzbekistan – agrees. ‘The mixed-use complex is comparable to an ecosystem where residents can access services and facilities regardless of weather conditions without going outdoors. A successful example of implementing such an approach in Central Asia is Abu Dhabi Plaza in Astana, a large-scale project of five buildings with a total area of over 500,000 sqm. An interesting example is the office and retail complex in Tashkent City (Lot 3), which includes the largest shopping centre in Uzbekistan and office and hotel towers.

Provided the owner or investors create a well-thought-out infrastructure, this mixed-use complex can become a junior analogue of the Moscow City concept, where residents can move between facilities without leaving them. In localised climates, mixed-use complexes may be particularly in demand, as they allow people’s everyday needs to be met within the boundaries of the site. Such accommodation becomes highly convenient for those who spend more than 8 hours daily, 5 days a week in the office. However, according to Evgeny Grikhanov, one of the most difficult tasks remains to maintain a unified concept of the facility. ‘This is due to the fact that the sale of space to different owners makes it difficult to maintain the integrity of the concept and complicates the provision of residents with the necessary level of services in the required volume and quality, thereby reducing the attractiveness of the complex’.

The limited developers’ access to project financing and the high cost of raising funds through commercial banks affect the solution to this challenging task. According to Grikhanov, the main problem is the lack of institutional investors who could ensure the long-term stability of the concept, while developers often seek to sell space as quickly as possible and exit the project.

The market for such facilities in Uzbekistan is in the initial stage of development and is testing the concepts most suitable for the needs and requirements of local residents. The demand for such facilities will grow as the volume and number of foreign investments and international companies increase. This may be due to the peculiarities of corporate culture and the high standards and requirements of employee accommodation.

The Risks, Mistakes and Solutions of International Financial Centers (IFCs)

Despite the advantages of multifunctional complexes, developers often encounter various challenges. Examples from some completed projects in Tashkent highlight the consequences of insufficiently planned solutions:

– The excessive amount of commercial space has led to many vacant lots in certain projects, diminishing their economic efficiency.

– The sale of infrastructure and commercial spaces to different owners has resulted in residents facing a chaotic mix of tenants, varying in quality or format.

– The lack of a standardised system for pricing rental rates has made these facilities less competitive.

– The absence of a professional management company has resulted in inadequate oversight of the facility’s operations, negatively impacting its functionality and residents’ perception.

Proper zoning and separation of human traffic are crucial for the complex’s successful operation in designing mixed-use developments that include residential components. Residents, shoppers, office workers, and other visitors should have distinct routes and access points corresponding to their functions within the complex. This raises construction costs due to the need for additional entrance groups, elevators, reception areas, and lobbies. In large horizontal projects, the construction of mixed-use complexes can be phased, allowing for the sequential completion of individual segments. For instance, residential blocks may be completed first while other segments, such as business or shopping centers, are still under construction. The successful realisation of such projects depends on accurately assessing the market potential of each segment, enabling income generation from completed facilities before the entire project is finished.

Another important factor is the high cost of maintaining and servicing mixed-use developments. The diverse functions within the project require specialised planning solutions, specific occupancy types, and substantial labour costs to ensure proper operation.

Additionally, different complex segments — whether residential, commercial, office, or entertainment — may require distinct management approaches. Therefore, it is essential for the developer to engage a professional management team and specialised operators before the facility is opened. It is vital to clearly define the roles, operating procedures, and coordination among all management participants in advance.

Keys to success: how to design a commercial zone in mixed-use complexes

Commercial infrastructure serves as both an additional source of profit for developers and a factor influencing the project’s overall image and attractiveness. Buyers are often willing to pay a premium for unique value, such as a comfortable environment with a variety of services and amenities within walking distance. The appropriate size and quantity of commercial (retail) space varies for each project, as there is no universal standard governing their proportion within residential complexes. This ratio depends on factors such as the scale and location of the project, the target audience, and market positioning. For instance, premium projects typically feature high-end boutiques and restaurants, while mass-market developments focus more on supermarkets, pharmacies, and essential services. In large multifunctional residential complexes, commercial infrastructure can constitute as much as 10% of the total space, while in smaller projects or point developments, this figure usually does not exceed 5%.

Commercial areas located on the ground floors must be designed to accommodate the needs of potential tenants and their businesses. Key design considerations include optimal room sizes, spacing between columns, panoramic windows, convenient access roads, and other features that enhance the functionality and attractiveness of the spaces. Errors made during the design phase can result in costly and sometimes irreversible operational challenges. Such deficiencies could negatively impact tenants by decreasing foot traffic and sales, ultimately lowering the profitability of the purchased premises for investors. For example, to accommodate a large supermarket, a spacious and well-planned sales area with minimal column interruptions, ample parking, and a designated unloading zone are essential. Conversely, for a café or restaurant, creating an appealing space with panoramic views and the necessary technical facilities for equipment installation, as well as convenient outdoor seating, is crucial.

The developer’s primary objective is to create a property, sell it, and generate profit. Although selling a multifunctional complex in parts is technically possible, it is generally inadvisable. If the new owner of a sold space decides to change its intended use, it can negatively affect residents’ perception of the entire project. For instance, a plumbing supply store or delivery service could occupy a prominent location instead of a promised high-quality restaurant or supermarket. The best outcome arises when developers retain control over key infrastructure areas, such as retail galleries and service zones, ensuring compliance with the project’s original concept. This approach helps prevent the emergence of unsuitable shops or questionable services in place of desired retail or dining options.

According to Evgeny Grikhanov, the manager of the Nest One mixed-use complex, if a developer opts to sell all complex areas to separate owners, it becomes the responsibility of the management company to uphold the project’s concept and manage the facility. The management company plays a crucial role in maintaining the original vision and efficiently overseeing operational processes, regardless of whether the property is retained by the developer or sold off in portions. There remains significant demand for such projects in Tashkent, driven not only by the attractive initial pricing but also by interest in complexes that offer unique concepts and a comprehensive range of infrastructure.

However, selling properties in installments challenges maintaining the promised quality and concept. Residents frequently express disappointment when anticipated amenities, such as cafés, fitness centers, or recreational areas, are delayed or not delivered. This highlights the necessity for meticulous planning and professional management to keep the facility engaging and appealing. Fortunately, many developers in the Uzbekistan market are gradually recognising the risks associated with selling premises and the importance of collaborating with a professional management company to maximise concept preservation.

Defining a project concept is impossible without conducting a thorough marketing analysis of the surrounding environment. This analysis helps identify the needs of prospective residents, forecast demand, and create a competitive project. As mentioned earlier, mixed-use projects can encompass many space types. However, not all segments will be equally prioritised; focus will be placed on those functions with the greatest potential in each instance. Typically, a project developer’s primary measure of success is revenue; however, functions generating maximum benefits now may not necessarily remain the most profitable in the future. It is essential to consider market conditions and current trends across multiple segments, including residential, office, retail, and, in some cases, the hospitality segment of the project. Commercial infrastructure is not only an additional source of profit for the developer but also affects the image of the project and its attractiveness. Buyers are willing to pay a premium for a unique value in the form of a comfortable environment and a variety of services and facilities within walking distance. The size and quantity of commercial (retail) space are determined individually for each project, as no single standard would regulate their share in the residential complex. This indicator varies depending on the scale and location of the project, target audience and market positioning. For example, premium projects are characterised by high-end boutiques and restaurants, while the emphasis shifts to supermarkets, pharmacies and essential services in the mass segment. In large multifunctional residential complexes, the share of commercial infrastructure can be as much as 10%, while in point developments this figure rarely exceeds 5% of the total residential area.

For example, commercial areas located on the ground floors should be designed to meet the needs of potential tenants and their businesses. This includes optimal room sizes, column spacing, panoramic windows, convenient access roads and other characteristics that will ensure high functionality and attractiveness of the lots. Mistakes made at the design stage can lead to difficulties in operation, which will be either too expensive or impossible to correct. Consequently, such deficiencies may negatively impact tenants: turnover and attendance will decrease, thus affecting the profitability of the purchased premises for investors. For example, to accommodate a large supermarket, it is necessary to provide a spacious and properly planned sales area with a minimum number of columns, convenient parking and a hidden area for unloading goods in advance. It is important for a café or restaurant to create an attractive space with panoramic glazing and viewability, the necessary technical facilities for equipment placement and a convenient terrace.

The developer’s goal is to create a property, sell it and make a profit. Of course, selling a multifunctional complex in parts is possible, but highly undesirable.

The new owner of the sold space may change its purpose, which will affect residents’ perception of the entire facility. For example, instead of the promised haute cuisine restaurant or a quality supermarket, a plumbing shop or an internet delivery point may appear in a prominent place. The best product will be obtained where the developer retains control, leaving the ownership of key infrastructural areas, such as retail galleries and service areas, ensuring compliance with the stated concept. This approach will avoid the situation when inappropriate shops and dubious services appear instead of quality retail or cafes.

According to Evgeny Grikhanov, the manager of the Nest One mixed-use complex, if the developer decides to sell all the complex areas to different owners, it becomes the task of the management company to maintain the concept and manage the facility. It plays a key role in maintaining the original idea and effectively managing operational processes, regardless of whether the property remains in the developer’s ownership or is sold off in instalments. There is still a high demand for such projects in Tashkent, which is explained not only by the affordable price at the initial sales stage, but also by the interest in complexes that offer a unique concept and a wide range of infrastructure.

Nevertheless, selling off such properties in instalments presents challenges in maintaining the promised quality and concept. Residents are often disappointed when promised services such as cafes, fitness facilities or recreation areas are delayed or absent. This emphasises the need for careful planning and professional management to keep the facility interesting and attractive. However, it is encouraging to see that developers in the Uzbekistan market are gradually beginning to realise that the sale of premises can carry risks to the preservation of the concept and that working together with a professional management company will maximise its preservation.

Defining the project concept is impossible without a marketing analysis of the environment. Such an analysis helps to identify the needs of future residents, forecast demand, and create a competitive project. As we said earlier, mixed-use projects can include a wide range of space uses, but not all segments in projects will be equal. Priority will be given to those functions that have the greatest potential in each particular case.

As a rule, the main criterion of success for a project developer is revenue. Still, those functions that will bring the maximum benefit now will not necessarily remain the most profitable. It is important to consider market conditions and current trends in several segments at once: residential, office, retail, and in some cases the analysis includes the hotel segment of the project. Such an analysis will help to answer important questions affecting the success of the project: the level of rental rates in the location, the demand and profile of tenants, the optimal combination of functions and, in general, how realistic it will be to create the chosen concept, taking into account the existing and future competition.

Target audiences for such projects can be divided into internal and external groups. Internal audiences include, for example, residents, office workers, and hotel guests. External audiences include employees of neighbourhood offices, local residents, tourists and visitors. Each of these user groups has unique behavioural characteristics. For example, they may differ in the frequency of visits, amount of spending, and the selection and use of specific services and facilities that meet their goals and needs.

These hypotheses must be quantified, analysed, confirmed, or refuted in order to successfully identify opportunities and form the right strategy. Thus, a well-developed facility concept and its subsequent professional management contribute to the successful launch of the facility into the market, increasing its competitiveness. Regardless of the scale and set of functions, every such project must have clearly defined and measurable criteria to ensure its future success. Such facilities will undoubtedly have an advantage.