Why Is San Francisco One of the Strongest Markets for Mixed-Use Investment?
San Francisco's mixed-use property market is experiencing a resurgence driven by new zoning reforms, massive waterfront development projects, and a fundamental shift in how the city thinks about combining residential, commercial, and retail space. Mixed-use loans in San Francisco are in high demand as developers and investors respond to the city's ambitious plan to add 36,200 new housing units by 2031, with much of that growth concentrated along commercial corridors and transit lines that are ideally suited for mixed-use development.
The city's commercial mortgage rates for mixed-use properties currently start at approximately 5.18% for stabilized assets, with rates varying based on property type, leverage, and borrower qualifications. Cap rates for well-located mixed-use properties in San Francisco range from 4.85% in prime neighborhoods like the Marina and Pacific Heights to 5.85% citywide, reflecting strong investor demand despite the challenges that have affected the broader commercial real estate market.
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San Francisco's mixed-use market benefits from several converging trends. The AI technology boom has brought tens of thousands of high-earning workers to neighborhoods like SoMa, Mission Bay, and the Financial District, creating demand for walkable live-work-play environments that mixed-use properties are uniquely positioned to provide. At the same time, the city's Family Zoning Plan, signed into law in December 2025, dramatically expands where mixed-use development can occur by allowing mid-rise (6 to 8 story) and high-rise (9+ story) housing on all major transit and commercial streets.
What Types of Mixed-Use Properties Can You Finance in San Francisco?
Mixed-use properties in San Francisco span a broad spectrum, from traditional two-story buildings with ground-floor retail and upper-floor apartments to massive waterfront developments combining thousands of residential units with hundreds of thousands of square feet of office, retail, and community space. Lenders evaluate each mixed-use property type differently, and understanding these distinctions is essential to securing the right financing.
Vertical mixed-use buildings represent the most common configuration in San Francisco. These properties typically feature ground-floor retail or commercial space with residential units above. In neighborhoods like the Mission, Hayes Valley, North Beach, and the Castro, these buildings form the backbone of the streetscape. Lenders generally treat these properties favorably because the residential component provides stable cash flow while the commercial space offers upside potential.
Horizontal mixed-use developments, which combine separate residential and commercial buildings within a single project, are increasingly common in San Francisco's larger development sites. Projects like Mission Rock, which will feature 1.4 million square feet of commercial space alongside approximately 1,300 residential units (including 480 affordable units), represent the scale of mixed-use development now reshaping the city's waterfront. The Power Station project in Dogpatch is another example: a 29-acre mixed-use waterfront development that includes a partnership with UCSF for a 300,000-square-foot medical building.
Live-work spaces represent a uniquely San Francisco mixed-use category. These units, which combine residential and commercial functions within a single space, are particularly popular in the SoMa and Dogpatch neighborhoods. Financing live-work conversions requires lenders who understand how San Francisco's rent control ordinance applies to these hybrid spaces, as units in which tenants reside in a nonresidential unit with the landlord's knowledge may be subject to rent control protections.
How Does San Francisco's Family Zoning Plan Affect Mixed-Use Financing?
The Family Zoning Plan, officially signed into law by Mayor Lurie in December 2025 and taking effect on January 12, 2026, represents the most significant zoning reform in San Francisco in decades. For mixed-use property investors and developers, this legislation fundamentally changes the development potential of properties along the city's commercial corridors and transit streets.
The plan increases height limits to allow six- to eight-story multifamily housing projects on neighborhood commercial corridors such as California Street and Balboa Street, and on transit corridors along Geary Boulevard, Taraval Street, and Judah Street. This upzoning creates new mixed-use development opportunities in neighborhoods that were previously limited to two- to four-story buildings, significantly increasing the potential density and value of well-located parcels.
For lenders, the Family Zoning Plan creates both opportunities and complexities. Properties that benefit from increased density allowances may be worth significantly more as development sites than as stabilized income-producing assets, creating a gap between current use value and highest-and-best-use value. Bridge lenders and construction lenders are particularly active in financing acquisitions of properties in newly upzoned corridors, as developers seek to assemble sites for larger mixed-use projects.
The plan also includes a local bonus program with square-footage incentives for housing and mixed-use projects that add "warm shell" (nearly move-in-ready) retail spaces, replace existing commercial spaces with equivalent storefronts, or retain historic storefronts compliant with preservation design standards. These incentives can improve project economics and make mixed-use developments more attractive to both developers and their lenders.
For existing mixed-use property owners, the upzoning may create opportunities to add density through vertical additions or by redeveloping underutilized portions of their sites. Lenders experienced in San Francisco's entitlement process can structure financing that accounts for the increased development potential while managing the execution risk inherent in any redevelopment project.
What Are the Current Loan Programs Available for Mixed-Use Properties?
San Francisco's mixed-use property market is served by a diverse range of lending programs, each designed for different property profiles, borrower objectives, and investment strategies. The right financing structure depends on whether you are acquiring a stabilized property, repositioning an existing building, or developing a new mixed-use project from the ground up.
Conventional commercial mortgages from banks and credit unions represent the most cost-effective financing option for stabilized mixed-use properties. These loans typically offer rates starting at 5.18% with loan-to-value ratios of 65% to 75% and terms of 5 to 10 years with 25- to 30-year amortization. Lenders evaluate both the residential and commercial components, and properties with strong occupancy in both segments qualify for the most favorable terms.
DSCR (Debt Service Coverage Ratio) loans are increasingly popular for mixed-use investment properties in San Francisco. These programs underwrite primarily to the property's cash flow rather than the borrower's personal income, making them attractive for investors with complex financial situations or multiple properties. DSCR lenders typically require a minimum coverage ratio of 1.20x to 1.25x for mixed-use properties, with rates ranging from 6.5% to 8.5%. Learn more about DSCR financing at our DSCR loan programs page.
SBA 504 loans provide an excellent option for owner-occupants of mixed-use properties where the borrower's business occupies at least 51% of the space. The SBA program offers up to 90% financing with below-market fixed rates on the CDC portion, making it one of the most affordable financing options available. For a mixed-use building where a restaurant, retail shop, or professional office occupies the ground floor and the owner lives upstairs, the SBA 504 program can be particularly compelling.
Bridge loans serve borrowers who need to act quickly on acquisition opportunities or who are repositioning mixed-use properties. San Francisco's dynamic market frequently creates situations where a mixed-use building with below-market rents, vacant commercial space, or deferred maintenance can be acquired at a discount and repositioned for higher returns. Bridge lenders offer 12- to 36-month terms at rates of 7% to 11%, providing the flexibility to execute a business plan before refinancing into permanent financing. Explore our bridge loan options for more details.
What Neighborhoods Offer the Best Mixed-Use Investment Opportunities?
San Francisco's diverse neighborhoods each present distinct mixed-use investment characteristics, shaped by local demographics, transit access, zoning regulations, and economic drivers. Understanding these neighborhood dynamics helps investors identify properties that align with their investment objectives and helps lenders assess the risk profile of financing requests.
The Mission District remains one of San Francisco's most vibrant mixed-use corridors, with Valencia Street and Mission Street anchoring a diverse ecosystem of restaurants, retail shops, and residential units. The neighborhood's strong foot traffic, cultural identity, and transit access (BART stations at 16th and 24th Streets) support healthy demand for both residential and commercial space. Mixed-use properties in the Mission typically trade at cap rates of 4.5% to 5.5%, reflecting the neighborhood's desirability and limited supply.
Hayes Valley has transformed from a neighborhood scarred by the Central Freeway into one of San Francisco's most desirable mixed-use corridors. The neighborhood's walkable streetscape, independent retail culture, and proximity to Civic Center and the tech-heavy Mid-Market area make it a prime location for mixed-use investment. New development along Octavia Boulevard and Patricia's Green continues to add density, and the Family Zoning Plan will allow further growth along the Hayes Street corridor.
SoMa and the Financial District are experiencing a fundamental reimagining as mixed-use neighborhoods. The Downtown Revitalization Financing District, established in February 2026, channels property tax revenue toward office-to-residential conversion projects, while the AI boom has brought thousands of new workers to the area. Mixed-use properties in these neighborhoods benefit from strong daytime foot traffic driven by office workers and growing residential demand as more housing is added through conversions and new development.
Treasure Island represents San Francisco's most ambitious new mixed-use community. The island is being transformed into a sustainable development featuring thousands of homes, new retail, and hundreds of acres of open space. The first condominium project, 490 Avenue of the Palms, launched sales in 2025. For investors and developers, Treasure Island offers the rare opportunity to participate in the creation of an entirely new neighborhood, though the isolated location and reliance on ferry and bus transit present unique considerations for lenders.
How Do Rent Control and Tenant Protections Affect Mixed-Use Financing?
San Francisco's rent control ordinance and tenant protection laws significantly influence how lenders underwrite mixed-use properties, particularly those with residential components built before June 13, 1979. Understanding these regulations is essential for both borrowers and lenders, as they directly affect property cash flows, operating expenses, and investment returns.
The annual allowable rent increase for rent-controlled units effective March 1, 2025 through February 28, 2026 is 1.4%, tied to the Consumer Price Index. This modest cap on rental growth means that lenders underwriting rent-controlled mixed-use properties must be conservative in their income growth assumptions. Properties with long-term tenants paying significantly below market rents may show limited near-term income growth despite strong market fundamentals.
Commercial spaces within mixed-use buildings are generally not subject to San Francisco's rent control ordinance, creating an important distinction in how lenders evaluate the two components of a mixed-use property. The commercial portion may offer greater income growth potential through market-rate lease renewals, while the residential portion provides stability but with constrained growth. Lenders experienced in San Francisco mixed-use properties understand how to balance these dynamics in their underwriting.
The retail vacancy situation in San Francisco adds another dimension to mixed-use lending analysis. The citywide retail vacancy rate has stabilized at approximately 6% to 8%, with net absorption turning modestly positive in 2025 after absorbing roughly 180,000 square feet more than was lost. Market rents for retail space remain essentially flat, with approximately negative 1.5% annual growth as of the third quarter of 2025, though forecasts suggest a return to positive rent growth by 2026.
For investors acquiring mixed-use properties in San Francisco, the interaction between rent control, commercial lease dynamics, and tenant protection laws creates a complex operating environment. Working with a lender who understands these nuances can make the difference between securing favorable financing terms and facing unnecessarily restrictive underwriting. Use our DSCR calculator to model how rent control affects your property's debt service coverage.
What Are the Key Financial Metrics Lenders Evaluate for Mixed-Use Loans?
Lenders evaluating mixed-use loan applications in San Francisco focus on several financial metrics that are specific to properties combining residential and commercial uses. Understanding these metrics and how they are calculated helps borrowers prepare stronger applications and negotiate better terms.
Debt Service Coverage Ratio (DSCR) is the primary measure lenders use to assess a mixed-use property's ability to support loan payments. For San Francisco mixed-use properties, most lenders require a minimum DSCR of 1.20x to 1.30x, meaning the property's net operating income must exceed annual debt service by at least 20% to 30%. Properties with a mix of rent-controlled and market-rate units may face more conservative DSCR requirements because lenders discount the income growth potential of rent-controlled units.
Loan-to-Value (LTV) ratios for mixed-use properties in San Francisco typically range from 65% to 75% for permanent financing and up to 80% for bridge loans. Lenders determine property value using a combination of income capitalization, comparable sales, and replacement cost approaches. In a market where cap rates range from 4.85% to 5.85%, small changes in the capitalization rate used in underwriting can significantly affect the appraised value and maximum loan amount.
The commercial-to-residential ratio of a mixed-use property affects both the loan program eligibility and the interest rate. Properties where the residential component represents more than 50% of the total square footage or income may qualify for more favorable residential-oriented loan programs. Conversely, properties with a dominant commercial component are typically underwritten as commercial properties with higher rate requirements.
Operating expense ratios in San Francisco tend to be higher than the national average due to property taxes, insurance costs, earthquake insurance requirements, and maintenance expenses associated with the city's aging building stock. Lenders typically expect operating expense ratios of 40% to 50% for mixed-use properties, with higher ratios for older buildings with deferred maintenance or buildings requiring seismic upgrades.
What Major Mixed-Use Projects Are Shaping San Francisco's Future?
Several landmark mixed-use developments are transforming San Francisco's urban landscape, creating new neighborhoods and redefining existing ones. These projects illustrate the scale of mixed-use investment flowing into the city and the types of financing structures being used to make them possible.
Mission Rock, developed by the San Francisco Giants and Tishman Speyer, represents one of the most significant mixed-use waterfront projects in the city's history. At full build-out, the project will deliver 1.4 million square feet of commercial space and approximately 1,300 residential units, with 480 affordable apartments available to households earning between 45% and 150% of the area median income. The first phase includes the repurposing of Station A into creative office space and construction of the initial 735 homes, with completion targeted for 2026.
Piers 30 and 32 along the Embarcadero is another transformative mixed-use project, featuring more than 375,000 square feet of office space, 70,000 square feet of retail, and over 700 residential units. This waterfront development will reshape one of the most prominent stretches of San Francisco's shoreline and create a new mixed-use destination combining housing, employment, shopping, and recreation.
The Power Station project in Dogpatch covers 29 acres and includes a partnership with UCSF for a 300,000-square-foot medical building alongside housing, retail, and open space. The project demonstrates how mixed-use development in San Francisco increasingly incorporates institutional and healthcare uses alongside traditional residential and commercial components.
For investors interested in San Francisco's mixed-use market, these large-scale projects create spillover effects that benefit surrounding properties. Neighborhoods adjacent to major developments typically see increased demand for both residential and commercial space, rising property values, and improved infrastructure. Visit our San Francisco commercial loans overview for a comprehensive guide to financing opportunities across the city.
Frequently Asked Questions About Mixed-Use Loans in San Francisco
What is the minimum down payment for a mixed-use property loan in San Francisco?
The minimum down payment for a mixed-use property loan in San Francisco depends on the loan program and property type. Conventional commercial mortgages typically require 25% to 35% down, while SBA 504 loans for owner-occupied mixed-use properties may allow as little as 10% down. DSCR loans generally require 20% to 30% equity. Properties with a stronger residential component may qualify for lower down payment requirements, as residential tenants provide more stable cash flow. The borrower's experience, credit profile, and the property's location also influence equity requirements.
Can I use an SBA loan to buy a mixed-use building in San Francisco?
Yes, SBA 504 and SBA 7(a) loans are excellent options for purchasing mixed-use buildings in San Francisco, provided the borrower's business will occupy at least 51% of the total usable space. The SBA 504 program offers up to 90% financing with a fixed rate on the CDC portion, making it one of the most affordable mixed-use financing options available. The borrower must demonstrate that the business is eligible under SBA guidelines and that the mixed-use property meets the owner-occupancy requirement. For buildings where the residential component exceeds 49% of the space, other financing programs may be more appropriate.
How does rent control affect mixed-use property valuations in San Francisco?
Rent control significantly impacts mixed-use property valuations in San Francisco. Properties with rent-controlled residential units (generally those built before June 1979) are valued based on actual in-place rents rather than market rents, which can result in lower appraised values. The 2025-2026 annual allowable increase is only 1.4%, limiting income growth projections. However, commercial spaces within mixed-use buildings are typically not subject to rent control, providing an opportunity for market-rate adjustments. Lenders account for these dynamics by applying different capitalization rates to the residential and commercial components during underwriting.
What cap rates should I expect for mixed-use properties in San Francisco?
Cap rates for mixed-use properties in San Francisco vary by neighborhood and property quality. Prime locations such as the Marina and Pacific Heights achieve cap rates as low as 4.85%, while the citywide average sits at approximately 5.85%. For 5+ unit apartment buildings (many of which are mixed-use), the median cap rate held steady at 5.22% in Q2 2025. Factors that influence cap rates include the proportion of rent-controlled versus market-rate units, the strength of the commercial tenancy, building condition, seismic compliance, and proximity to transit. Properties in newly upzoned corridors may trade at lower cap rates due to their increased development potential.
What are the insurance requirements for mixed-use properties in San Francisco?
Mixed-use property insurance in San Francisco includes several requirements beyond standard commercial property coverage. All lenders require comprehensive property insurance, general liability coverage, and loss of rents/business interruption insurance. Given San Francisco's seismic risk, earthquake insurance is strongly recommended and often required by lenders, though it can add significant cost (typically 0.5% to 2% of the building's insured value annually). Properties with commercial tenants may also require proof of tenant liability insurance. Buildings in flood zones require flood insurance. The total insurance cost for a mixed-use property in San Francisco typically runs 1.5% to 3% of the property value annually.
How long does it take to close a mixed-use property loan in San Francisco?
Closing timelines for mixed-use property loans in San Francisco range from 30 to 90 days depending on the loan type and property complexity. Conventional commercial mortgages typically take 45 to 75 days, including appraisal, environmental review, and title work. SBA loans may require 60 to 90 days due to additional government processing requirements. Bridge loans can close in as little as 14 to 21 days for straightforward transactions. Factors that can extend timelines include properties with environmental concerns, complex rent roll analysis for rent-controlled buildings, seismic evaluation requirements, and title issues common in San Francisco's older building stock. Contact our team at /contact to discuss your timeline and financing needs.
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