The appeal in mixed-use developments relies on the ability for it to bring in a dual income, both rental income from the residential units, and higher yield leases from commercial spaces such as coffee shops, gyms and stores.

At Pure Property Finance we’ve seen a huge rise in client appetite for mixed-use and semi-commercial projects over the past 18 months.

An urban migration

Urban living is changing, and naturally, investors are following the money. Mixed-use developments, where commercial and residential elements are blended, are proving to be more resilient and profitable, as well as being more future-proofed than a property that offers one or the other.

Demand is now surging, especially in areas such as London and the South East of England.

These regions are both densely populated, which is the main reason for mixed-use properties to have a sudden boom. Research from Savills has shown that high-street vacancy rates in the areas are falling a lot faster where retail is integrated with residential, creating a vibrant ‘live-work’ neighbourhood that can attract both tenants and businesses too.

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Investors are acquiring large plots of land, retaining part for their own operations and income, but then subletting the rest, creating a layered income strategy that is a bit more appealing to lenders and market shocks. If one side of the property slows down, then the other part will keep the cash coming in.

Mixed-use properties, other than diverse income streams, also offer investors:

• lower vacancy risk — there are stronger tenant demands in urban hubs
• faster capital appreciation — flexibility in design and use increases long-term value
• greater market resilience — especially in downturns, with one sector offsetting the other

Additionally, lenders are now adapting much quicker than they once were to mixed-purpose properties.

The financing needs of mixed-use developments

Financing mixed-use properties can be more nuanced than purely residential or commercial loans. Fortunately, the lending market is evolving to meet demand. Many lenders now offer tailored products designed specifically for mixed-use and semi-commercial acquisitions.

These facilities often come with flexible terms, interest-only periods, and structured repayments that align with the nature of the asset. As advisors, our role is to navigate these options to secure the most competitive and suitable funding package for each client’s unique needs.

With government initiatives promoting urban regeneration and relaxed planning regulations, including expanded Permitted Development Rights, the conditions for mixed-use development are only improving.