Mixed-use development has always played by a different economic rulebook than single-asset projects. That’s because it requires more capital, more coordination, more patience, and more alignment between public and private stakeholders. As a result, shifts in the broader economy tend to show up faster and more intensely with mixed-use projects.

Looking ahead to 2026, several economic indicators and market conditions stand out as particularly consequential for mixed-use development. Taken together, they suggest a year of cautious optimism where opportunity is opening back up, but discipline, phasing, and execution will matter more than ever.

Here are 8 indicators we think will matter most in mixed-use development this year and what each is likely to mean for developers, investors, and municipalities.

1. Interest Rates & Cost of Capital

Mixed-use projects are capital-intensive and structurally complex. They often rely on layered capital stacks that include construction debt, mezzanine financing, equity, and sometimes public incentives or tax-advantaged financing. Carry costs matter, and long development timelines magnify the impact of interest rates.

Gradually easing interest rates should improve feasibility for projects that stalled in 2024–2025, particularly those that were close to penciling but couldn’t absorb higher debt service. Even modest rate cuts can materially help mixed-use projects because of their scale and duration.

That said, lenders are expected to remain selective. Phased projects, experienced sponsorship, conservative assumptions, and strong submarket fundamentals will continue to be prerequisites for financing. So while development pipelines are reopening, underwriting discipline is likely here to stay.

2. Capital Markets & Investor Appetite

Mixed-use sits at the intersection of multiple asset classes: residential, retail, office, hospitality, and entertainment. When structured well, this diversity can spread risk. When poorly structured, it can amplify it.

Institutional investors are beginning to re-enter the market, but with a sharper focus on execution certainty. Capital is gravitating toward projects with stabilized or stabilizable components, such as residential, grocery-anchored retail, or daily-needs services.

Office-heavy mixed-use remains difficult to finance unless the office component is Class A, specialized (like medical or life sciences), or anchored by government or institutional users.

Capital is available, but only for well-underwritten, clearly executable projects.

3. Housing Demand & Affordability Pressures

In most mixed-use developments, residential density is the economic engine. It drives foot traffic, supports retail and services, and provides predictable cash flow that helps stabilize the project as a whole.

Housing shortages persist in many U.S. metros, supporting continued multifamily demand even as rent growth moderates. Cities increasingly view mixed-use development as a tool to deliver housing while also advancing broader goals around walkability, transit use, and economic development.

Residential-led mixed-use remains the most financeable and resilient model, so projects that include workforce or affordable housing components may well benefit from incentives, expedited approvals, or favorable zoning treatment.

4. Office Market Reset & Hybrid Work

Office has often been the weakest link in mixed-use projects, but it can also be the biggest opportunity when reimagined correctly.

New office space within mixed-use developments is viable primarily when it meets specific criteria: it represents a smaller share of the overall project, serves a specialized use (e.g., medical, education, civic), or directly supports on-site residential and retail activity. Adaptive reuse and office-to-residential conversions are increasingly becoming part of broader mixed-use district strategies, especially in downtowns and legacy office corridors.

So while traditional office-heavy mixed-use may continue to struggle, expect flexible, service-oriented office to survive.

5. Consumer Spending & Experiential Retail

Retail and food-and-beverage uses are the placemaking glue of mixed-use. They create identity, energy, and reasons for people to stay rather than simply just pass through.

Consumers continue to prioritize experiences and everyday services over discretionary goods. This favors restaurants, entertainment, wellness, and local service providers. Retail success is less about total square footage and more about curation, programming, and integration with surrounding uses.

Grocery-anchored or daily-needs retail remains especially valuable, improving project stability and lender confidence. So look for well-curated, experience-driven retail to continue to thrive.

6. Construction Costs & Phasing Strategy

Ground-up mixed-use construction is expensive and carries significant risk – from cost overruns to interest carry to timing mismatches between components.

Construction cost inflation has cooled but remains elevated relative to pre-pandemic norms. In response, developers are increasingly phasing projects, delaying vertical components until pre-leasing thresholds are met, and aggressively value-engineering shared infrastructure like parking.

Large, all-at-once megaprojects are becoming less common outside the strongest markets, so expect more incremental development and fewer single-phase megaprojects.

7. Public Policy, Zoning & Incentives

Mixed-use development often depends on public-sector alignment, whether through zoning flexibility, infrastructure investment, or direct incentives.

Many cities are becoming more open to higher density, reduced parking requirements, and mixed-income housing as they work to address housing shortages and sustainability goals. Incentives are increasingly tied to housing delivery, transit-oriented development, and revitalizing existing but underperforming districts.

Municipalities that can clearly articulate priorities and move efficiently through approvals will be best positioned to attract private capital. Because there will always be strong opportunities where public goals align with private investment.

8. Demographics, Walkability & Lifestyle Preferences

Mixed-use succeeds where people actually want to spend time, not just where zoning allows density.

Millennials and Gen Z continue to favor walkable, amenity-rich environments that support a live-work-play lifestyle. While urban cores remain important, suburban mixed-use nodes around town centers and transit hubs are outperforming expectations, especially in high-growth regions.

Because demand supports well-located, walkable, transit-accessible mixed-use environments, access to transit, public spaces, and authentic local character will be increasingly decisive factors.

The Bottom Line

2026 is shaping up to be a constructive year for mixed-use development, but not a carefree one. Projects that are anchored, residential-led, phased, experience-driven, and aligned with public priorities are best positioned to succeed. For municipal leaders and real estate stakeholders alike, the message is clear: when economics, policy, and place work together, mixed-use remains a strong investment and a powerful economic development tool.

McCullers Group specializes in sports- and entertainment-anchored mixed-use developments, providing public- and private-sector clients with best-in-class predevelopment planning, project management, and operational optimization solutions. To learn more about the market or to discuss your legacy project, contact Cortland McCullers at cortland@mccullersgroup.com.