The conventional wisdom on mixed-use development has long held that it works best in dense, high-cost urban cores where land prices justify the complexity and construction costs associated with layering residential above retail. In those markets, the math has made sense for decades. In secondary markets, the same logic was rarely applied.
That calculation is changing. Across the Midwest, developers are discovering that mixed-use models don’t just work in markets like Kansas City, Columbus, and Indianapolis. In some cases, they work better.
Parker Webb has been making that argument for years. As principal at FTW Investments and a developer focused on mixed-use and community-oriented projects across the Kansas City metro, he has built his investment thesis around the idea that the secondary market mixed-use opportunity has been consistently undervalued by institutional capital.
“Coastal investors look at a mid-size Midwestern city and see lower rents and lower growth,” Webb said. “What they’re not pricing in is lower risk, lower development costs, and a community that actually wants this kind of project.”
The Secondary Market Structural Advantage
The case for secondary market mixed-use development starts with cost structure. In markets like Kansas City, land acquisition, construction labor, and permitting processes are all more manageable than in gateway markets. That cost differential allows developers to underwrite attainable rents while still generating acceptable returns, a combination that is nearly impossible to achieve in New York, Los Angeles, or San Francisco at current cost levels.
The demand side is also shifting. A 2025 demographic analysis of Midwest metros found that the region added a net 85,000 residents between 2023 and 2025, with the largest gains concentrated in metros with strong healthcare, technology, and logistics employment bases. Kansas City sits near the top of that list, having added approximately 25,000 residents in 2024 alone.
Those new residents skew younger and are more likely to prioritize walkability, mixed-use convenience, and neighborhood character than previous generations. They’re also more likely to rent rather than buy, at least initially, which sustains demand for well-designed residential product above ground-floor commercial space.
“The resident profile is changing,” Webb said. “The people moving to Kansas City now want the same things people in Chicago or Denver want. They want to walk to a coffee shop, to a pharmacy, to a restaurant. Mixed-use is the product that delivers that.”
The Ground-Floor Retail Challenge
Mixed-use development is not without complications. The most persistent challenge is ground-floor retail activation. Projects that look great on a rendering frequently struggle to lease their commercial space, either because the market has shifted, the space wasn’t designed with the right tenant in mind, or the project was built in a location that can’t generate enough foot traffic to support traditional retail.
Webb approaches the retail component of mixed-use projects differently than many developers. Rather than designing for a generic commercial tenant and hoping the market fills the space, he begins with an end-use perspective, identifying the services the surrounding community actually needs and designing the space around those requirements.
“If I know the neighborhood needs childcare, I design a ground-floor suite that works for childcare. If it needs a pharmacy, I design for that. Starting with the tenant and working backward produces better space and better leasing outcomes,” he said.
That approach has also shaped how he structures lease terms. Community-serving tenants often can’t afford market-rate rent, particularly in their early years of operation. Webb has experimented with graduated lease structures that provide below-market rent in years one through three, with step-ups as the tenant’s revenue stabilizes. The trade-off is upfront yield compression; the benefit is long-term stability and a ground floor that actually activates the building.
Public-Private Alignment
One structural advantage that secondary markets offer, which Webb cites regularly, is a more accessible and receptive public sector. In oversupplied coastal markets, city agencies are often overwhelmed, navigating competing developer interests, political sensitivities, and entrenched regulatory processes. In Kansas City and comparable Midwest metros, relationships between developers and public agencies tend to be more direct and collaborative.
That alignment creates opportunities. Tax increment financing, new market tax credits, opportunity zone incentives, and community development block grants are all tools that can materially improve the economics of mixed-use projects when deployed correctly. In secondary markets, those tools are often more accessible and less competitive than in gateway cities.
“Kansas City wants development that works for the community,” Webb said. “If you come in with a project that makes the case for itself on those terms, the city tends to be a partner, not an obstacle.”
He adds a caveat: the public-sector advantage only holds when developers approach it honestly. Projects that use community-benefit language to secure incentives and then fail to deliver on those commitments damage trust and make future collaboration harder. Webb is direct about the long-term cost of that approach.
“You can game the system once,” he said. “After that, you’ve burned the relationship and made it harder for everyone else working in that market.”
The Long-Term Case
Webb’s conviction about secondary market mixed-use is rooted in a long-term view of how American cities are evolving. As remote and hybrid work make proximity to coastal job centers less essential, the advantages of secondary markets — affordability, quality of life, community access — are becoming more visible to a broader population.
“The cities that are positioned to grow over the next 20 years are not necessarily the ones that grew over the last 20,” he said. “Midwestern cities with strong bones, strong communities, and room to develop are in a different position than they were a decade ago.”
For investors who can look past the short-term yield comparison and underwrite for a longer horizon, the secondary market mixed-use opportunity may represent one of the more durable positions available in commercial real estate today.
