Why Is Mixed-Use Development Thriving in Indianapolis?
Indianapolis is in the midst of a mixed-use development boom that reflects broader national trends toward walkable, live-work-play communities. The metro's strongest neighborhoods, from Mass Ave and Broad Ripple to the suburban downtowns of Carmel and Fishers, are increasingly defined by projects that combine residential units with ground-floor retail, restaurant, and office space.
The $70 million Versa project in Broad Ripple Village perfectly illustrates this trend: 233 apartment units above 3,600 square feet of ground-floor retail, replacing the vacant former Kroger site. The Marko On the Canal project adds 69 luxury units to an existing mixed-use parking structure at a key Broad Ripple intersection. Downtown Indianapolis, Fountain Square, the Wholesale District, and the Monon Trail corridors in Carmel and Fishers are all experiencing similar mixed-use development momentum.
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Several fundamental forces drive this momentum. Indianapolis's metro population of 2.14 million has grown 4.1% since 2020, creating housing demand in walkable locations. Rents remain approximately 25% below the national average, giving developers room for profitable delivery at price points that attract tenants. Eli Lilly's $13 billion expansion is bringing high-income workers who demand urban and suburban lifestyle amenities. And municipal governments across the metro, particularly Carmel and Fishers, are actively incentivizing mixed-use development through zoning reforms, TIF districts, and infrastructure investments.
For investors and developers seeking mixed-use financing in Indianapolis, the market's combination of demand-side strength, constrained new supply (the multifamily pipeline dropped 60% from 2024 to 2025), and supportive local policy creates a compelling development environment.
What Mixed-Use Loan Programs Are Available in Indianapolis?
Mixed-use properties present unique financing challenges because they combine multiple property types under a single roof. Lenders must evaluate both the residential and commercial components, which may have different risk profiles and market dynamics. Here are the primary loan programs available.
Conventional Bank Loans
Local and regional banks are the most active lenders for mixed-use properties in Indianapolis, particularly for projects under $10 million. Banks can structure loans that account for the blended income streams from residential and commercial tenants, offering 5 to 25-year terms with fixed or adjustable rates. Indiana-based institutions often have firsthand knowledge of Indianapolis's mixed-use corridors and can underwrite with confidence.
CMBS Loans
For larger mixed-use properties with stabilized income and diversified tenant bases, CMBS loans provide non-recourse financing with 5 to 10-year terms. CMBS lenders evaluate mixed-use properties based on the property's overall NOI and the credit quality of commercial tenants. Properties where the residential component represents more than 50% of income may qualify for more favorable multifamily-oriented underwriting.
Agency Loans (Fannie Mae and Freddie Mac)
For mixed-use properties where the residential component represents at least 80% of the total income or square footage, Fannie Mae and Freddie Mac agency loans may be available. These loans offer the most competitive rates, non-recourse structures, and long terms. Mass Ave, Broad Ripple, and Downtown properties with small ground-floor retail spaces may qualify for this approach.
Bridge Loans
Bridge loans are essential for mixed-use properties in lease-up or transition. New mixed-use developments often need 12 to 24 months to stabilize both the residential and commercial components, and bridge financing provides the flexibility to achieve full occupancy before transitioning to permanent financing.
Construction Loans
Ground-up mixed-use development requires construction loans that account for the complexity of building multiple property types within a single structure. These loans feature draw schedules tied to construction milestones and typically convert to permanent financing (or require refinance) upon completion and stabilization.
SBA Loans
Owner-occupants who operate a business in the commercial portion of a mixed-use property may qualify for SBA 504 loans. This is common for restaurant owners, retail operators, or professional services firms that live above or adjacent to their business in Indianapolis's urban neighborhoods.
What Are Current Mixed-Use Loan Rates in Indianapolis?
Mixed-use loan rates in Indianapolis depend on the property's composition (ratio of residential to commercial income), occupancy, tenant quality, and the loan program selected.
Properties with a larger residential component generally access more competitive rates because multifamily lending offers more favorable terms than commercial lending. A mixed-use building where 80% of income comes from apartments and 20% from ground-floor retail might qualify for near-agency pricing, while a 50/50 residential-commercial split would be priced more conservatively.
Cap rates for mixed-use properties in Indianapolis vary by location, quality, and tenant mix. Stabilized mixed-use properties in prime corridors like Mass Ave, Broad Ripple, and Carmel trade at cap rates in the 5.5% to 7.0% range. Value-add mixed-use properties with repositioning potential trade at 7.0% to 9.0%. The spread between cap rates and financing costs supports positive leverage for well-structured acquisitions.
Where Is Mixed-Use Development Most Active in Indianapolis?
Mixed-use development and investment activity in Indianapolis is concentrated in several key corridors, each with distinct characteristics and financing considerations.
Mass Avenue (Mass Ave)
Mass Ave is Indianapolis's original mixed-use corridor, where residential units above restaurants, galleries, and boutique retail have defined the neighborhood's character for decades. The district's walkability, cultural vibrancy, and proximity to Downtown employment centers support premium pricing for both residential and commercial components. Lenders view Mass Ave mixed-use properties favorably due to the corridor's proven demand and limited available inventory.
Broad Ripple Village
Broad Ripple is experiencing a transformation through mixed-use development. The $70 million Versa project and the $271 million Broad Ripple Avenue improvement project are reshaping the village into a more urban, walkable destination. Mixed-use properties in Broad Ripple benefit from strong residential demand (average one-bedroom rents around $1,429) and an eclectic retail and restaurant scene that drives commercial tenant interest.
Downtown Indianapolis
Downtown offers mixed-use opportunities ranging from new ground-up construction to adaptive reuse of historic buildings. The Wholesale District, Indiana Avenue, and Georgia Street corridors are particularly active for mixed-use development. Eli Lilly's campus expansion and the broader downtown revitalization effort provide long-term demand drivers for both residential and commercial space.
Carmel City Center and Monon Trail
Carmel has invested heavily in creating walkable, mixed-use environments that rival anything in the region. The City Center, Arts and Design District, and the Monon Trail corridor feature a growing inventory of mixed-use buildings that combine residential, retail, office, and civic uses. Municipal support for mixed-use development in Carmel is among the strongest in the Midwest.
Fishers Nickel Plate District
Fishers has rapidly developed its downtown around the Nickel Plate Trail, creating a walkable mixed-use district with apartments above restaurants, retail, and entertainment venues. The city's young demographics and growing employment base support strong demand for urban-format living combined with lifestyle amenities.
Fountain Square
Fountain Square's arts-oriented identity supports mixed-use development that combines creative workspaces, residential units, and ground-floor retail and restaurant tenants. The neighborhood's improving fundamentals and remaining affordability create value-add opportunities for investors willing to execute repositioning strategies.
How Do Lenders Underwrite Mixed-Use Properties in Indianapolis?
Mixed-use underwriting is more complex than single-use property underwriting because lenders must evaluate multiple income streams with different risk profiles. Here are the key considerations.
Income Composition Analysis
Lenders will categorize the property's income by source (residential vs. retail vs. office) and apply different underwriting standards to each component. Residential income is generally viewed as more stable and lower risk. Commercial income is evaluated based on tenant credit, lease terms, and the relationship between in-place rents and market rents. Properties with a predominant residential income stream (80% or more) may qualify for multifamily-oriented underwriting, which typically offers better terms.
Vacancy and Collection Assumptions
Lenders apply different vacancy assumptions to each property component. Residential vacancy in Indianapolis typically ranges from 5% to 8% for well-located properties. Commercial vacancy assumptions may be higher, particularly for retail or office components in less established corridors. Lenders also factor in credit loss (the risk that tenants default) and may apply haircuts to income from smaller, local commercial tenants.
Lease Structure and Rollover
The commercial component's lease structure significantly affects underwriting. Long-term leases with built-in rent escalations are preferred. Properties with significant near-term lease rollover in the commercial component face more conservative underwriting, as the risk of commercial vacancy is higher than residential vacancy in the current market. DSCR requirements for mixed-use properties typically range from 1.20x to 1.30x.
Physical Configuration
Lenders evaluate whether the property's mixed-use configuration is functionally sound. Key factors include separate entrances for residential and commercial tenants, adequate parking for both uses, proper soundproofing between uses, and compliance with fire and safety codes. Poorly designed mixed-use buildings may face underwriting challenges regardless of their financial performance.
Location and Market Position
Mixed-use properties thrive in walkable, amenity-rich locations with strong pedestrian traffic. Indianapolis's best mixed-use corridors (Mass Ave, Broad Ripple, Carmel City Center, Fishers Nickel Plate) benefit from the density and lifestyle amenities that support both residential and commercial demand. Properties in less walkable locations may struggle to achieve the synergy between uses that makes mixed-use concepts successful.
Use our DSCR calculator to estimate your mixed-use property's debt service coverage.
What Challenges Do Mixed-Use Borrowers Face in Indianapolis?
Mixed-use financing presents several unique challenges that borrowers should anticipate and plan for.
Lender Classification
One of the primary challenges is lender classification. Different lenders categorize mixed-use properties differently depending on the ratio of residential to commercial space. A property that one lender treats as "multifamily with incidental commercial" might be classified as "commercial" by another lender, resulting in materially different terms. Working with a lending team that understands how different lenders view mixed-use properties, like Clear House Lending, can help borrowers access the most favorable classification.
Phased Lease-Up
Mixed-use properties often experience phased lease-up, where residential units fill faster than commercial spaces (or vice versa). This can create temporary DSCR challenges during the stabilization period. Bridge loans with adequate term length and interest reserves help borrowers navigate this transition.
Complex Operating Structures
Mixed-use properties require more sophisticated property management than single-use buildings. Residential and commercial tenants have different needs, maintenance schedules, and expectations. Operating expenses can be harder to predict, and allocating costs between residential and commercial components adds complexity. Lenders evaluate the borrower's property management plan as part of the underwriting process.
What Is the Mixed-Use Loan Process in Indianapolis?
The mixed-use loan process combines elements of both residential and commercial loan underwriting. Here is the typical timeline.
Borrowers should prepare a comprehensive package that includes separate income and expense analysis for the residential and commercial components, detailed lease abstracts for commercial tenants, a current rent roll, property condition assessment, Phase I environmental report, and (for value-add or development projects) a detailed business plan. The additional complexity of mixed-use underwriting means that closing timelines may be 1 to 2 weeks longer than for single-use properties.
What Tax Incentives Support Mixed-Use Development in Indianapolis?
Mixed-use development in Indianapolis benefits from several incentive programs that can meaningfully improve project economics.
Indiana's flat state income tax of 3.05% (declining to 2.9% by 2027) benefits developers and investors. TIF districts in Downtown Indianapolis, Broad Ripple, and other urban areas can redirect property tax increments to support development infrastructure. Opportunity Zones in designated census tracts provide capital gains tax benefits for qualifying mixed-use investments.
Carmel and Fishers have been particularly proactive in supporting mixed-use development through zoning flexibility, infrastructure co-investment, and expedited permitting for projects that align with their community development plans. These municipal incentives can reduce development costs and improve project returns.
Historic tax credits are available for qualifying adaptive reuse projects that convert existing buildings (such as former industrial or commercial structures) into mixed-use developments. These credits can offset 20% to 25% of eligible renovation costs for properties listed on the National Register of Historic Places.
How Can You Get Started With Mixed-Use Financing in Indianapolis?
Whether you are developing a ground-up mixed-use project in Broad Ripple, acquiring a stabilized mixed-use building on Mass Ave, repositioning a property in Fountain Square, or purchasing an owner-occupied mixed-use building through an SBA loan, the right financing structure is essential to maximizing your investment returns.
Clear House Lending specializes in mixed-use and commercial real estate financing across Indianapolis and Central Indiana. Our team understands the nuances of mixed-use underwriting and can help you navigate lender classification, compare programs, and close efficiently. Contact us today to discuss your Indianapolis mixed-use investment.
Frequently Asked Questions About Mixed-Use Loans in Indianapolis
What percentage of a property must be residential to qualify for agency (Fannie/Freddie) financing?
Fannie Mae and Freddie Mac generally require that the residential component represents at least 80% of the property's total income or square footage for the property to qualify for agency multifamily financing. Properties that fall below this threshold are typically financed as commercial properties, which may carry higher rates and more restrictive terms.
Can I get a mixed-use loan with no income verification?
DSCR loans are available for stabilized mixed-use investment properties in Indianapolis, allowing borrowers to qualify based on the property's cash flow rather than personal income documentation. These loans are subject to the same minimum DSCR requirements as other property types (typically 1.0x to 1.25x). Use our DSCR calculator to estimate your property's coverage.
How do lenders handle the commercial vacancy risk in mixed-use properties?
Lenders typically apply higher vacancy assumptions to the commercial component (10% to 20%) than to the residential component (5% to 8%) when underwriting mixed-use properties. Some lenders also "stress test" the property by assuming the commercial component is fully vacant to determine whether the residential income alone can service the debt. Properties that pass this stress test receive more favorable terms.
What is the typical down payment for a mixed-use property in Indianapolis?
Down payment requirements for mixed-use properties in Indianapolis typically range from 20% to 30%, depending on the loan program and property characteristics. Properties classified as multifamily (80%+ residential) may require only 20% to 25% down. Properties with a larger commercial component may require 25% to 30%. SBA 504 loans for owner-occupied mixed-use properties can require as little as 10% to 15% down.
Can I finance a mixed-use property that is still under construction?
Construction loans are available for ground-up mixed-use development in Indianapolis. These loans typically cover 60% to 75% of total project costs and feature draw schedules tied to construction milestones. Construction-to-permanent loan structures can combine the construction and permanent financing into a single loan, simplifying the process and reducing costs.
What are the best Indianapolis corridors for mixed-use investment?
Mass Ave offers the most proven mixed-use demand with premium pricing. Broad Ripple is transforming through major investments and offers strong upside. Downtown provides scale and development opportunity, particularly in emerging neighborhoods. Carmel and Fishers deliver suburban mixed-use with strong municipal support. Fountain Square offers value-add opportunities with improving fundamentals. Contact our team for personalized guidance based on your investment strategy.