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Mixed-use Property for Sale in San Antonio – Is it a Good Investment?

June 22, 2021

The development of the mixed-use property is on the rise in San Antonio. There are plans for new developments downtown near the Riverwalk, in the Pearl District, as well as in other parts of the city. Should you consider mixed-use property for sale in San Antonio in your real estate portfolio? Here’s what you need to know about this type of investment.  

What is Mixed-use Property?

Mixed-use property is basically a property that has multiple types of real estate and it’s set in a pedestrian-friendly environment. For example, it could include a combination of retail stores, offices, and residential dwellings. Both businesses and residents of this type of property benefit from the arrangement. When compared to single-use properties, mixed-use buildings show better long-term performance, high returns, and more predictable income streams. Mixed-use property for sale in San Antonio has become much more common in recent years. 

Different Types of Mixed-use Commercial Property

Mixed-use properties can vary greatly with design as well as their use. But in general, they fall into one of several categories.

Vertical Mixed-use Property – This type of commercial property is typically a mix of retail and service spaces on the lower floors, offices along the middle floors, and upper floors that contain either residential or hotel units. 

Horizontal Mixed-use Property – With this type of commercial property, there are multiple single-use buildings that include businesses, retail stores, and residential units all within walking distance. 

Walkable Mixed-use Property – In this kind of commercial property, there are both horizontal and vertical spaces and they are usually anchored by some sort of outdoor plaza, event space, or market area. 

You can find mixed-use property for sale in San Antonio in each of these categories. This kind of commercial property has increased in demand for a number of reasons. First, the way that the world works has seen a shift in recent times. And this shift has become even more pronounced lately as businesses and people adapt to life after Covid-19.

There’s also been a shift in consumer behavior. And many people in today’s generations don’t view homeownership as the American dream.  They have a live-work-play mentality and prefer convenience and walkability to the typical suburban lifestyle of the past. 

As a result, there’s an increased demand for apartments. But again, landlords recognize that today’s apartment dwellers want nice amenities and convenience. Mixed-use properties are attractive because they offer all of this within steps of their residential space. 

Mixed-used properties are desirable for landlords and property developers because they drive more effective use of land by essentially creating cities inside of cities. Plus, they perform better than single-use properties in economic downturns. 

Pros and Cons of Buying Mixed-use property

There are a number of good reasons to invest in mixed-use property for sale in San Antonio as well as reasons to approach this type of real estate with caution. The key is knowledge so that you can weigh both the pros and cons. Here are a few to consider:

The Pros of Mixed-use Property 

First, owning mixed-use property that you can lease out to different types of tenants means diversification of your income streams. This type of property has been proven to outperform single-use properties during economic downturns. 

An additional benefit is that tenants find this type of property desirable, especially retail and business tenants as mixed-use attracts more foot traffic, which can lead to more business. Mixed-use property also benefits conservation as sprawl is reduced and environmental resources are conserved. 

The Cons of Mixed-use Property

On the flipside, the mixed-use property could turn sour if it is poorly planned. For example, conflicts could arise between commercial and residential tenants. Poor planning could also lead to heavy traffic or issues with parking if public transit is not an option or there’s a lack of available parking spots. 

Another potential con is that getting financing for one of these developments could be a challenge, especially in smaller markets as institutional lenders tend to favor primary markets. 

How to qualify to buy mixed-use property

Unless you have large amounts of cash lying around, you’ll likely need a loan to buy mixed-use property in San Antonio. Most mixed-use loans for commercial real estate are available between $500,000 and $25 million. The maximum loan-to-value (LTV) ratio on these loans is 75 percent. So, you’d likely need to come to the table with at least 25 percent of the property’s purchase price as a down payment. 

While interest rates vary, commercial mixed-used loan rates are usually between 5 and 7 percent. These rates are available as both fixed and variable. In addition to the interest rate, you’ll also incur loan origination fees and closing costs. And many loans also come with a prepayment penalty. 

As with other types of commercial loans, there are minimum requirements to qualify. They are as follows:

  1. A personal credit score of at least 660
  2. 6 to 12 months of cash reserves
  3. A minimum debt service coverage ratio of 1.25
  4. At least 2 years of stable operating history in your business

If you meet these minimum requirements, you can start looking for San Antonio mixed-use properties.  

Mixed-use Property in San Antonio

Mixed-use property is increasingly popular in San Antonio and its transforming certain parts of the city. For example, there’s The Pearl development. It’s 27 acres close to downtown which includes the historic Pearl brewery as well as plans for office and retail spaces, multi-family units, and even an event space. There’s also a 1000 room convention center hotel in the works. Altogether, this will be a $560 million mixed-use development. 

While the downtown project is still in the planning stages and the Pearl district is under development, there are other areas of town with mixed-use properties that are already thriving. Take the Quarry Village in Alamo Heights, for example. This property includes about 71,000 square feet of retail and entertainment space as well as a 288-unit apartment complex.  

It includes well-known stores and restaurants including Trader Joe’s, Jamba Juice, and Orangetheory Fitness. 

Mixed-use property is a growing trend and part of the shift in how people live and work in San Antonio and across the nation.