Mixed-Use Development

A mixed-use development combines more than one use, such as apartments over ground-floor shops or offices, in a single building or project. Each use has its own leases, expenses and market cap rate, so valuing one means building NOI for each part separately.

Residential units usually have short gross leases, while retail tenants may be on longer net leases. Vacancy assumptions differ too: an empty storefront can sit much longer than an empty apartment. Blending everything into one NOI and one cap rate hides those differences.

Appraisers often value each component with its own cap rate and add the results. An investor can do the same with the calculator by running each use separately. The overall cap rate is then the combined NOI divided by the total price.