Mixed-Use Investments Can Round Out A Multifamily Investor’s Portfolio

March 17, 2021

While walking along some of Chicago’s main neighborhood thoroughfares like Clark Street, Milwaukee Avenue, Division Street, and Armitage Avenue, the most common type of property one might see is a building with street-level retail or office space and apartments on the floors above. These are examples of mixed-use buildings.

Purchasing a mixed-use property can be an excellent investment and a great way for a multifamily investor to round out their portfolio. Having sold multiple mixed-use buildings over the years, we have found that this type of investment is best suited for an investor with some experience in the retail/office market as well as a general knowledge of multifamily properties.

A mixed-use property is zoned to allow multiple combined uses within one building. From an investor’s perspective, one benefit of this type of building is the ability to collect income through multiple streams. In addition to monthly rent paid by the residential and retail tenants, the retail tenant operator often also reimburses the property owner for its share of the cost of real estate taxes. For example, at 5622-5628 N. Clark Street, a mixed-use building situated on the corner of Clark Street and Olive Street in Chicago’s beautiful Andersonville neighborhood, there are two first-floor retail tenants and 15 apartment units. In addition to rent, these retail tenants may also be responsible for their pro-rata share of the real estate taxes, operating costs, as well as individual utilities. In some ways, a retail tenant helps shoulder some of the costs associated with managing a property.

“When evaluating whether to purchase a mixed-use investment property there are three important things to consider: location, location, and location. 5622-5628 N. Clark Street is situated in a prime location along Andersonville’s main retail thoroughfare. The quaint shops, restaurants, and entertainment options along Clark street are some of the main attributes that make Andersonville such a charming and desirable place to live” explains Essex Principal and listing broker Jim Darrow.

He continues, “Many multi-family investors pass on mixed-use buildings due to the perceived higher risk assigned to the retail component, but when you have a property that is well located in a vibrant retail corridor with historically low vacancy with a small portion of the income coming from the retail space(s) that risk is mitigated. In addition, the retail tenant(s) often pay a portion of the property’s operating expenses boosting the property’s net income, allowing the investor to achieve higher overall returns compared to just a traditional multi-family property.”

For more information on 5622-5628 N. Clark Street, click HERE

Reach out to an Essex commercial real estate broker today for more information on mixed-use buildings!

Since 1990, Essex Realty Group, Inc. has served Chicago’s investment real estate market as a top multifamily real estate brokerage firm. Contact us to learn more about our recent Chicagoland multifamily and mixed-use property sales and talk to a Chicago multifamily broker today.

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