San Diego has become one of the most dynamic mixed-use development markets on the West Coast. With a regional population exceeding 3.3 million, limited buildable land, and aggressive transit-oriented growth policies, the city is doubling down on live-work-play projects that combine residential, retail, and office space into walkable communities. For investors and developers eyeing San Diego mixed-use loans, the opportunity window is wide open, but financing these projects requires a lender who understands both the local market and the complexity of multi-component properties.
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Why Is San Diego a Top Market for Mixed-Use Development?
San Diego's mixed-use boom is driven by several converging forces. The city's housing shortage remains severe, with demand outpacing supply by thousands of units annually. At the same time, the City of San Diego has rolled out some of the most developer-friendly policies in California to encourage dense, mixed-use infill.
The Complete Communities Housing Solutions (CCHS) program, approved by City Council in December 2020 and expanded since, offers developers floor area ratio (FAR) incentives of 4.0, 6.5, 8.0, or even unlimited FAR for projects near high-frequency transit that include affordable units. Qualifying projects must reserve 40% of base units at affordable rates, with 15% for very low income households, 10% for low income, and 15% for moderate income. In return, developers can bypass discretionary approvals and California Environmental Quality Act (CEQA) review for most projects, dramatically cutting entitlement timelines.
State density bonus law adds another layer of incentive. The Midway Rising project, a proposed 4,254-unit mixed-use development on 48 acres of city-owned land near the Sports Arena, is leveraging density bonus provisions to push past the district's 30-foot height limit. If approved by City Council in early 2026, Midway Rising would include 2,000 affordable units, a new 16,000-seat arena, and over 500,000 square feet of commercial space.
What Types of Mixed-Use Properties Are Being Built Across San Diego?
San Diego's mixed-use pipeline spans nearly every submarket, from coastal urban cores to suburban transit corridors. Here is a look at the neighborhoods driving the most activity.
East Village and Downtown: The IDEA District and Makers Quarter continue to attract creative mixed-use projects combining live-work spaces, tech offices, and ground-floor retail. The East Village Quarter, a $1.5 billion redevelopment surrounding Petco Park, will overhaul Tailgate Park into a residential and hospitality hub with food, shopping, and parks. Meanwhile, Holland Partner Group's The Torrey, a mixed-use development featuring Downtown's first Whole Foods Market, is expected to complete by mid-2026.
Little Italy: Kilroy Realty has submitted plans for a 137-foot mixed-use tower with 309,000 square feet of office space and 12,000 square feet of retail on a 1.3-acre lot. Little Italy continues to command premium rents due to walkability and dining-district appeal.
North Park and Hillcrest: These mid-city neighborhoods are seeing a wave of smaller mixed-use infill, typically 4 to 6 stories with ground-floor retail and 20 to 80 residential units above. The city's Mixed-Use Zones Update is specifically targeting these corridors for increased density.
Mission Valley: Riverwalk San Diego is the region's marquee mixed-use project, a $3 billion, 200-acre master-planned community that will eventually contain 4,300 multifamily units, 110 acres of parkland, 1 million square feet of office space, and 150,000 square feet of retail. In October 2025, developer Hines secured $380 million in financing to resume construction on Phase 1, which includes 721 market-rate apartments and a new Green Line Trolley station.
Fashion Valley: Simon Property Group announced plans to transform Fashion Valley into a luxury mixed-use destination with 850 residences by AMLI Residential and 100,000 square feet of new retail, with construction following JCPenney's closure at the end of 2025.
Midway District: Beyond Midway Rising, the broader district is seeing speculative mixed-use interest from developers betting on the area's eventual upzoning and freeway-adjacent accessibility.
Chula Vista Bayfront: The 535-acre bayfront redevelopment, the West Coast's largest waterfront project, includes the recently opened Gaylord Pacific Resort (1,600 rooms), the Amara Bay development with 1,500 condos across seven towers, and additional mixed-use parcels totaling thousands of new housing units.
How Do San Diego Mixed-Use Loans Work?
Mixed-use properties combine multiple revenue streams, typically residential rental income, commercial lease income, and sometimes hospitality or parking revenue, into a single asset. This complexity means that lenders evaluate these projects differently than single-use properties.
At Clear House Lending, we structure San Diego mixed-use loans based on the specific composition of each project. Key factors include the residential-to-commercial ratio, tenant mix, lease terms on commercial spaces, projected absorption rates, and location relative to transit and employment centers.
Common loan types for San Diego mixed-use projects include:
- Construction loans for ground-up development, typically 12 to 36 months with interest-only payments and draws based on construction milestones
- Bridge loans for value-add repositioning of existing mixed-use properties, such as converting underperforming retail into residential or upgrading outdated commercial spaces
- Permanent loans for stabilized mixed-use assets generating consistent rental income across all components
- SBA 504 loans for owner-occupied mixed-use buildings where the borrower occupies at least 51% of the space
What Loan Terms Are Available for San Diego Mixed-Use Properties?
Loan terms for San Diego mixed-use projects vary based on property type, borrower experience, and project stage. Here is a general breakdown of what borrowers can expect.
For construction loans, expect loan-to-cost (LTC) ratios of 65% to 80%, interest rates ranging from 7.5% to 10.5%, and terms of 12 to 36 months. Lenders will scrutinize your development experience, contractor qualifications, and the project's entitlement status. Projects leveraging Complete Communities or density bonus incentives may qualify for enhanced terms due to reduced entitlement risk.
For bridge loans, LTV ratios typically range from 70% to 80% of as-is value, with rates from 7% to 9.5% and 12 to 24-month terms. Bridge financing is ideal for investors acquiring mixed-use properties that need renovation or lease-up before qualifying for permanent financing.
For permanent loans, stabilized mixed-use properties in strong San Diego submarkets can secure LTV ratios of 65% to 75%, fixed rates from 5.5% to 7.5%, and terms of 5 to 25 years. Lenders favor properties with diversified tenant mixes and limited vacancy risk.
For SBA loans, owner-occupied mixed-use buildings may qualify for up to 90% financing through the SBA 504 program, with below-market fixed rates and 25-year terms.
Use our commercial mortgage calculator to estimate monthly payments and debt service coverage ratios for your San Diego mixed-use project.
Why Does Transit-Oriented Development Matter for Mixed-Use Financing?
San Diego's trolley system is a key driver of mixed-use development, and lenders pay close attention to transit proximity when underwriting these projects.
The Metropolitan Transit System (MTS) operates three trolley lines, the Blue, Orange, and Green lines, with 54 stations spanning over 50 miles. The Mid-Coast extension, completed in 2021, added service to UC San Diego and the VA Medical Center. The Orange Line Improvement Project, currently underway with Phase 1 starting in summer 2025 and completion expected in fall 2026, is modernizing aging infrastructure between 32nd and Commercial and Massachusetts stations.
The 12th and Imperial Transit Center, San Diego's busiest transit hub with connections to all three trolley lines, is now the anchor for a new transit-oriented development. MTS has approved a disposition and development agreement with the San Diego Housing Fund to build 100% affordable housing steps away from the station, with construction expected to begin in 2027.
For lenders, transit-oriented mixed-use projects carry lower risk profiles. Properties within a half-mile of trolley stations typically achieve higher occupancy rates, stronger rent growth, and lower cap rate compression. The Riverwalk project in Mission Valley, which includes a dedicated new Green Line Trolley station, secured $380 million in financing partly because of its transit connectivity.
What Are Cap Rates and Returns for San Diego Mixed-Use Properties?
Understanding San Diego's cap rate environment is essential for structuring your financing. As of early 2026, the market shows clear patterns across property types.
Multifamily cap rates in San Diego average just 4.3%, well below the national average of 6.1%. Class A multifamily properties trade at approximately 4.74%, Class B at 4.92%, and Class C at 5.38%. These compressed rates reflect the region's persistent housing shortage and strong rental demand.
Retail cap rates range from 5.0% to 6.5% for strip malls and neighborhood retail, with coastal locations compressing to around 4% and inland properties reaching 7% or higher.
Office cap rates have widened significantly, with Class A at 8.4%, Class B at 8.68%, and Class C at 9.02%, reflecting ongoing remote work impacts and lower occupancy.
For mixed-use properties, cap rates are typically blended based on the income contribution of each component. A residential-heavy mixed-use property in East Village might trade at a 4.5% to 5.5% cap rate, while a retail-heavy property in an inland submarket might see 6% to 7%.
What Should Borrowers Know About the San Diego Entitlement Process?
Entitlements can make or break a mixed-use development timeline in San Diego. Here is what borrowers and developers need to understand.
The city's Housing Affordability Toolkit, which includes Complete Communities, the Affordable Homes Density Bonus, and the 100-Percent Affordable Density Bonus, has dramatically streamlined approvals for qualifying projects. Under CCHS, developments that meet affordability thresholds can achieve massive infill density without triggering discretionary review. Development impact fees are waived for covenant-restricted affordable units and units under 500 square feet.
The city is also updating its Mixed-Use Zones to allow greater flexibility in project design and land use combinations. The Mid-City Communities Plan Update, covering neighborhoods like North Park, Hillcrest, City Heights, and Kensington, is expected to unlock additional mixed-use development capacity along major corridors.
For lenders, projects with clear entitlements and ministerial (non-discretionary) approval paths present significantly lower risk. This translates to better loan terms, faster closings, and higher leverage for borrowers who have navigated the entitlement process before approaching a lender.
How Do You Qualify for a San Diego Mixed-Use Loan?
Qualifying for a mixed-use loan in San Diego requires demonstrating both project viability and borrower strength. Here is what lenders typically evaluate.
Project Fundamentals: Lenders want to see a clear business plan that addresses the residential and commercial components separately. For new construction, this means detailed pro formas showing projected rents, absorption timelines, and stabilized net operating income. For value-add projects, lenders evaluate the renovation budget, timeline, and comparable properties to validate the projected rent increases.
Borrower Experience: Mixed-use development is complex, and lenders prefer borrowers with a track record. First-time developers may need to partner with experienced operators or accept lower leverage. At Clear House Lending, we work with both seasoned developers and emerging sponsors to find the right capital stack.
Location and Market: San Diego submarkets vary significantly. Downtown and coastal locations command premium valuations but also carry higher construction costs. Emerging submarkets like Chula Vista and the Midway District offer better land basis but may face longer lease-up periods. Lenders assess location within the context of transit access, employment centers, and demographic trends.
Financial Strength: Expect to demonstrate liquidity equal to 10% to 15% of the loan amount, a net worth at least equal to the loan size, and a strong credit profile. Commercial mixed-use loans also require detailed documentation of existing properties, income sources, and outstanding obligations.
What Neighborhoods Offer the Best Mixed-Use Investment Opportunities?
Not all San Diego submarkets are created equal for mixed-use investment. Here is a neighborhood-by-neighborhood breakdown of where the strongest opportunities lie in 2026.
East Village remains the epicenter of downtown mixed-use development. With the East Village Quarter, IDEA District, and new transit-oriented housing near 12th and Imperial, this neighborhood offers strong rental demand and walkability scores above 90. Cap rates are compressed, but rent growth continues to outpace the regional average.
North Park is one of San Diego's hottest mid-city markets for smaller mixed-use projects. The neighborhood's vibrant restaurant and bar scene supports strong ground-floor retail performance, and residential demand is fueled by proximity to Balboa Park and downtown. Expect 4 to 6 story infill projects with 20 to 60 units to pencil well here.
Mission Valley is undergoing a generational transformation. Riverwalk San Diego alone will add 4,300 units, and the broader corridor benefits from trolley access, freeway connectivity, and proximity to major employers. Mixed-use projects near existing and planned trolley stations command financing premiums.
Hillcrest offers similar dynamics to North Park with slightly higher density allowances along University Avenue and Washington Street. The neighborhood's established retail corridors and strong LGBTQ+ community identity create consistent commercial tenant demand.
Chula Vista represents the South Bay's biggest growth story. The bayfront redevelopment is drawing billions in investment, and the city's proximity to the border creates unique demand drivers for both residential and commercial space.
Midway District is a high-risk, high-reward play. If Midway Rising advances and the broader district is upzoned, early investors could see significant value creation. However, the ongoing legal challenges around height limits introduce uncertainty that lenders will price into their terms.
Frequently Asked Questions About San Diego Mixed-Use Loans
What is the minimum down payment for a San Diego mixed-use loan?
Down payment requirements vary by loan type and property stage. For stabilized mixed-use properties, expect 25% to 35% down (65% to 75% LTV). Construction loans typically require 20% to 35% equity. SBA 504 loans for owner-occupied mixed-use buildings may allow as little as 10% down. Borrowers with strong experience and financials may qualify for higher leverage through preferred lender programs.
Can I use an SBA loan for a mixed-use property in San Diego?
Yes. The SBA 504 program is specifically designed for owner-occupied commercial real estate, including mixed-use buildings. The key requirement is that the borrower must occupy at least 51% of the building's usable space. SBA loans offer below-market fixed rates, 25-year terms, and up to 90% financing, making them an excellent option for small business owners who want to own their building.
How long does it take to close a mixed-use loan in San Diego?
Timelines vary by loan type. Bridge loans and short-term financing can close in 2 to 4 weeks. Conventional permanent loans typically take 45 to 90 days. Construction loans may require 60 to 120 days due to third-party reports, appraisals, and construction document review. SBA loans generally take 60 to 90 days. At Clear House Lending, we streamline the process by pre-qualifying projects and coordinating with local appraisers who understand San Diego's mixed-use market.
Do San Diego's density bonus programs affect loan eligibility?
Density bonus programs can actually improve loan eligibility. Projects leveraging Complete Communities or state density bonus provisions often have clearer entitlement paths, which reduces risk for lenders. The trade-off is that affordable housing requirements may reduce projected revenue, so your pro forma must account for the blended rent structure. Experienced lenders like Clear House Lending know how to underwrite these programs accurately.
What is the difference between vertical and horizontal mixed-use in San Diego?
Vertical mixed-use places different uses on different floors of the same building, such as ground-floor retail with apartments above. This is the most common format in dense neighborhoods like East Village, Little Italy, and North Park. Horizontal mixed-use separates uses into different buildings within the same development, as seen in master-planned projects like Riverwalk and the Chula Vista Bayfront. Financing structures may differ: vertical mixed-use is typically financed as a single asset, while horizontal mixed-use may involve separate loans for individual phases or parcels.
Are mixed-use properties in San Diego a good investment in 2026?
San Diego's fundamentals strongly support mixed-use investment. The city's housing shortage, transit expansion, developer-friendly policies like Complete Communities, and diversified economy (military, biotech, tourism, tech) create durable demand for live-work-play environments. Cap rates are compressed, but rent growth and value creation through development or repositioning continue to offer attractive risk-adjusted returns, particularly in transit-oriented locations.
Ready to Finance Your San Diego Mixed-Use Project?
Whether you are developing a ground-up mixed-use project near a trolley station, repositioning an existing property in North Park, or acquiring a stabilized asset in Mission Valley, Clear House Lending has the experience and capital relationships to structure the right financing.
We work with developers and investors across San Diego County, from downtown East Village to the Chula Vista Bayfront. Our team understands the local entitlement landscape, transit-oriented development dynamics, and the nuances of underwriting multi-component properties.
Contact us today to discuss your San Diego mixed-use loan scenario. We will provide a preliminary quote within 24 hours and guide you through every step of the financing process.