Living The Live/Work Niche

This article first appeared in the PB June 2002 issue of Pro Builder.

Small-volume Parkwood Homes earned a place among the big boys by building these live/work units at Kentlands in Gaithersburg, Md.h

For small builders such as Parkwood Homes Ltd. of Gaithersburg, Md., the benefits of being among the first to build live/work units have far outweighed the significant risk of taking on a unique product.

Four years ago, Parkwood owner and CEO Steve Wilcox was one of the few takers on an offering of 13 live/work lots in Kentlands, a groundbreaking New Urbanist community in Gaithersburg. He saw the units as an opportunity to distinguish the company from the pack.

Today, Parkwood is a live/work expert. Despite its size (about 40 closings per year), it has been invited to buy single-family lots in master-planned communities including Stapleton in Denver and Urbana Fields in suburban Washington. Here are Wilcox’s live/work basics:

Two-thirds of the buyers are business owners who want to occupy the storefront and lease the floors above. The rest are real estate investors who can turn a profit in three ways: renting a third-floor, one-bedroom apartment; renting second-floor office/retail; and renting first-floor retail. Basements also figure into the deal for offices.

Stick to a basic floor plan on commercial levels. Leave it to buyers to make alterations on their own. Commercial codes typically add 30% or more to the cost of construction, so allowing changes is a money-losing proposition.

City officials are often a builder’s best ally. They are often as interested in seeing the concept work as you are and become problem solvers.

When developing pro formas, build in the necessary time and costs required to build commercial units.

Contrary to conventional wisdom, live/work units are profitable when priced right. The same three-floor units Parkwood began offering in the high $300,000s eventually sold in the mid-$500,000s.

Beginning with those first 13 units, Parkwood has built and sold 46 live/work units, 30 in Kentlands and 16 in a neighboring New Urbanist community called Lakelands.

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