Mixed-Use Momentum: Emerging Market Opportunities & Capital Infusion
By Majid Radaei, RadCRE · · Market Updates
Emerging markets are seeing a surge in mixed-use developments, driven by urban growth and investor interest. Public data shows U.S. mixed-use construction starts rose 12% in 2025.
The Shifting Landscape of Urban Development
The commercial real estate landscape continues its evolution, with mixed-use developments gaining significant traction, particularly in what were once considered secondary or tertiary markets. This trend is fueled by demographic shifts, evolving consumer preferences for live-work-play environments, and a strategic recalibration by institutional investors seeking higher yields and diversification beyond traditional gateway cities. Data from CoStar reports that U.S. mixed-use construction starts increased by 12% in 2025, underscoring robust developer confidence in this asset class.
Key Drivers in Emerging Markets
Several factors are converging to propel mixed-use projects in emerging markets. Firstly, affordability and population growth in these areas are attracting both residents and businesses. Cities like Raleigh, NC, Nashville, TN, and Austin, TX, have seen substantial in-migration, driving demand for integrated communities. Secondly, municipal incentives, including tax abatements and streamlined permitting processes, are making these markets more attractive for large-scale developments. For instance, the City of Chattanooga, TN, has actively promoted mixed-use projects through public-private partnerships, leading to significant revitalization efforts.
Investment trends also highlight this shift. According to an MSCI RCA report, investment volume in mixed-use properties in non-gateway metros grew by 8.5% year-over-year in 2024, outperforming traditional office or retail sectors in some major urban cores. Major players like Starwood Capital Group and Brookfield Asset Management have aggressively pursued opportunities in these areas, often forming joint ventures with local developers to leverage local expertise.
Notable Projects and Capital Deployment
Recent high-profile transactions exemplify this trend. In Phoenix, AZ, The Grove, a 16-acre mixed-use development featuring office, retail, and residential components, secured significant financing from a syndicate including J.P. Morgan and Truist Bank, reflecting lender confidence in well-located projects in growing metros. Similarly, in Charlotte, NC, Crescent Communities and Lincoln Harris broke ground on 'The Bowl at Ballantyne', a substantial mixed-use project that will include a hotel, retail, and entertainment areas, attracting capital from prominent equity partners.
The integration of purpose-built rental multifamily, dynamic retail (often featuring experiential concepts), and modern office spaces designed for hybrid work models characterizes these developments. Hospitality components, particularly select-service or lifestyle brands, are also frequently incorporated to cater to business and leisure travelers, providing an additional revenue stream and amenity for residents.
Lending Landscape and Capital Stack Innovation
Financiers are adapting to these evolving investment patterns. While traditional construction financing remains a challenge post-interest rate hikes, lenders are showing an appetite for proven mixed-use sponsors in high-growth emerging markets. Bridge loans are frequently utilized for acquisition and pre-development, with rates generally ranging from SOFR + 300-600 bps. For stabilized assets, CMBS continues to offer competitive spreads, typically T + 150-300 bps for strong sponsors. Mezzanine debt and preferred equity, often in the 12-18% range, are also playing a crucial role in filling capital stacks where senior debt leverage is constrained.
RadCRE Perspective
Majid Radaei, Founder of RAD Commercial Realty, notes, "The exodus from coastal gateway cities during COVID accelerated a trend we've been tracking for years: the undeniable rise of emerging markets. What's often misunderstood is that 'emerging' doesn't mean 'risky.' Many of these markets now boast stronger demographic fundamentals, a more favorable business environment, and, critically, a better cost basis for development. We're advising clients to look beyond the headlines and truly understand the granular economic drivers. The key to successful mixed-use in these markets lies in creating organic, walkable communities, not just combining asset classes. Lenders are increasingly sophisticated, favoring projects with diverse revenue streams and sponsors who demonstrate deep understanding of local demand. For our clients, we're seeing strong opportunities for construction-to-perm financing on well-conceived mixed-use hotel and multifamily components, particularly where there's a clear path to stabilization and compelling absorption rates. The capital is there for quality deals; it's just more discerning."
The Future Outlook
The trajectory for mixed-use developments in emerging markets remains strong. As remote work becomes more ingrained and population centers continue to decentralize, the demand for integrated, amenities-rich communities outside of traditional urban cores will persist. Savvy developers and investors will continue to unlock value by identifying these high-potential markets and executing well-conceived, community-centric mixed-use projects.
Tags: commercial real estate, mixed-use development, emerging markets, CRE investment, capital markets, construction financing, RadCRE, hotel investment sales
Sources: CoStar, MSCI RCA, Commercial Observer, GlobeSt, J.P. Morgan, Truist Bank, Crescent Communities, Lincoln Harris