Mixed-Use Development Cost Breakdown for 2025 (Multifamily & Retail)

Illustrative picture - Mixed Use

This case study provides a comprehensive guideline for understanding the full cost structure of smaller mixed-use developments in 2025. It outlines how materials, labor, land-related expenses, soft costs, and financing assumptions combine to shape the total development budget for a multifamily-and-retail project. By grounding the analysis in a real Atlanta-area project and comparing it to national benchmarks, the study offers a practical, data-driven reference point for investors, lenders, and developers evaluating similar mixed-use opportunities in today’s construction environment.

Project Overview: Total Cost and Key Metrics

As of November 2025, the total development cost for a proposed mixed-use project in Atlanta, GA is estimated at $2,515,956 for a gross building area of 12,000 square feet. This equates to approximately $209.66 per square foot, which positions the project at the lower end of U.S. mixed-use construction cost ranges (generally around $200–$300 per SF in many markets, varying by location and scope). All cost figures are derived from a detailed feasibility case study (using Marshall & Swift CoreLogic data) adjusted for the project’s type, location, and current market conditions.

Cost Breakdown: The budget is subdivided into major categories, with each component’s contribution both in dollar terms and as a percentage of total cost (and on a per-square-foot basis):

• Hard Construction Costs: $2,226,956 (88.51% of total, ~$185.6/SF)

• Contingency: $222,696 (8.85%, ~$18.6/SF)

• Equipment (FF&E): $54,000 (2.15%, ~$4.5/SF)

• Soft Costs: ≈$85,000 (3.38%, ~$7.1/SF)

• Financing & Interest: $150,000 (5.96%, ~$12.5/SF)

This breakdown reflects a development heavily weighted toward direct building expenditures (hard costs), with smaller allocations for reserves, soft costs, and financing. Each category is discussed below in context, using cost per square foot and percentage contributions to illustrate their significance.

Hard Costs: Base Construction and Building Systems (≈88.5%)

Hard costs account for the vast majority of the project budget – about 88.51% of total costs (approximately $185–186 per SF). This is in line with industry norms, as materials and labor typically constitute the bulk of a development’s cost (often on the order of 85–90% in commercial projects). In this case, the base building construction is the single largest component, estimated at $1,455,900 (around $121.33 per SF, or 57.9% of total cost). The base construction encompasses the core structural elements – foundation, structural frame, roofing, and primary interior build-out – essentially delivering a dried-in shell for the mixed-use building.

Several other significant building system costs fall under hard costs, each contributing a notable share:

• Exterior Walls and Façade: Approximately $378,360 total (about $31.53/SF, ~15% of total cost). This covers the building envelope, such as masonry or cladding systems, insulation, and windows – critical for both aesthetics and weatherproofing.

• HVAC (Heating, Ventilation, Air Conditioning): Roughly $167,520 (around $13.96/SF, ~6.7% of total). This represents mechanical systems to service the residential and commercial spaces, a substantial cost driver given the need for reliable climate control in mixed-use occupancies.

• Site Improvements and Utilities: About $52,000 (≈$4.3/SF, ~2% of total) allocated to on-site infrastructure such as basic utilities, drainage, and minor earthwork or grading around the building footprint.

• Fire Protection (Sprinklers): Approximately $57,540 (≈$4.80/SF), ensuring the building meets life-safety codes for fire suppression.

• Balconies and Specialty Structures: Around $74,880 (≈$6.24/SF) for balcony construction and any exterior decks or related structural features serving the residential units.

• Paving and Asphalt: Approximately $9,686 (only $0.80/SF), covering parking lot surfacing or driveway paving on the site.

• Landscaping: Around $10,470 (≈$0.87/SF), for green space, plantings, and exterior site finishing touches.

• Lighting (Exterior and Site Lighting): Roughly $40,147 (≈$3.34/SF), for outdoor lighting systems, walkways illumination, and possibly common area lighting.

Collectively, these hard cost elements sum to roughly $2.23 million. The dominance of hard costs underscores that the “bricks-and-mortar” base construction and building systems consume the lion’s share of the budget, as expected. Notably, the base structural cost alone (at ~$121/SF) constitutes more than half of the entire project cost, highlighting how fundamental building components drive overall budget. By contrast, secondary items like paving or landscaping are relatively minor by dollar value (each well under 1% of total cost), yet they are necessary for a complete, occupiable development. This granular hard cost breakdown also provides insight into where cost efficiencies might be sought – for example, choosing cost-effective façade materials or HVAC systems can meaningfully impact the total, given their sizable share.

Contingency Allowance (8.85% of Cost)

A contingency of 8.85% of total development cost (about $222,696, or $18.56 per SF) is included as a prudent risk buffer. This contingency budget is reserved to cover unforeseen expenses or overruns – such as design modifications, unexpected site conditions, or materials price inflation – that could arise during construction. An ~9% contingency is somewhat above the lower end of typical practice; many projects carry a contingency on the order of 5% (or a bit more in volatile markets). In this case, the higher 8.85% contingency reflects a conservative approach to risk management, ensuring the project can absorb cost surprises without jeopardizing its overall budget or schedule. By allocating roughly $18–19 per SF as a contingency, the developer and lenders maintain a cushion that can be tapped only if needed. If the contingency is not used, it effectively becomes cost savings or added project equity. Given the recent construction climate of 2024–2025 – marked by fluctuating material costs and supply chain uncertainties – such a contingency is a valuable safeguard.

Equipment and Fixtures (2.15% of Cost)

The budget sets aside $54,000 (approximately 2.15% of total, or $4.50/SF) for Equipment, which generally includes furniture, fixtures, and equipment (FF&E) needed to outfit the property. In a mixed-use development, this could encompass items like residential appliances (for apartments), common-area furnishings, and any specialty equipment for the commercial components (e.g. kitchen equipment for a café, if one is part of the program). At just over 2% of the total budget, equipment is a relatively small line item, which is typical – the primary structure and systems vastly outweigh FF&E in cost. However, these funds are important to deliver a turn-key project ready for occupancy. For instance, in the residential units, this budget would provide appliances and possibly in-unit finishes beyond the contractor’s base build, and for retail/office portions, it might contribute to initial tenant fit-out allowances or basic fixtures. The ~$4.50 per SF expenditure on equipment ensures that upon construction completion, the development is functional and can begin operations without additional major capital outlays by tenants or owners for essential equipment.

Soft Costs and Professional Services (≈3.4% of Cost)

Soft costs – expenditures for professional services, design, permits, and other non-construction activities – are notably low in this budget at an estimated 3.38% of total cost (about $85,000, roughly $7/SF). This is a minimal allocation by industry standards, as soft costs for many developments often range from ~8% up to 15% or more of project costs. The low percentage here could indicate that certain soft costs (like architecture, engineering, or developer fees) are being kept exceptionally lean or were accounted for elsewhere. It may also reflect an efficient project delivery method – for example, if a design-build contractor is handling design fees internally, or if some municipal fees are reduced or waived. Included in soft costs would be items such as: architectural and engineering design fees, civil and traffic consulting, permitting and inspection fees, legal and accounting services, and insurance during construction. Given the small budget share, the project is likely leveraging cost-effective professional services or benefiting from pre-existing work (for instance, a prototype design or repeatable plan). It’s worth noting that such a low soft cost ratio means the hard cost estimate is doing most of the “heavy lifting” in the pro forma; stakeholders will want to ensure that critical services (quality design, due diligence studies, etc.) are not under-scoped. In this case, the feasibility study’s assumptions suggest a streamlined soft cost approach, possibly due to competitive fees or in-house development expertise.

Financing and Interest Costs (5.96% of Cost)

About 5.96% of the project budget – $150,000 or roughly $12.50 per SF – is allocated to financial costs, primarily construction period interest and lender fees. In the case study, this includes an interest reserve (often called a “financial reserve”) of approximately $125,000 and a lender fee of around $25,000, bringing the total financing cost to $150k. This funding covers the cost of borrowing during construction: since the developer is seeking a commercial construction loan, interest accrues on funds as they are drawn for construction, and an interest reserve ensures those interest payments can be made in the first year (often the interest-only period while the project is being built and leased). The lender fee represents upfront charges by the bank (points, loan origination or processing fees).

At a 75% Loan-to-Cost (LTC) ratio, the anticipated loan amount for this project is about $1.887 million, with roughly $629k in equity funding (25% of cost) from the developer or investors. The loan is structured with a 6.75% interest rateand a 25-year amortization (with the first year interest-only). Under these terms, the interest reserve covers the initial interest-only payments so that the project is not burdened by debt service before it generates income. A debt service coverage analysis would be performed to ensure that once the project is stabilized (leased up and operating), the net operating income can comfortably cover the amortizing debt payments. Construction financing costs typically contribute a few percentage points to total development cost – commonly on the order of 2–5% in many projects – so the ~6% in this case is slightly above average, reflecting the relatively high interest rate environment of 2025 and the inclusion of a full year of interest pre-funded. It underscores that carrying costs of capital are a non-trivial portion of project budgets, especially as interest rates rise. For developers and lenders, understanding this component is crucial: it affects required project returns and necessitates that rental income (from apartments, retail, etc.) will be sufficient to service debt once the project is complete.

Benchmarks: How Does $209/SF Compare Nationally?

At $209.66 per square foot, this Atlanta mixed-use development’s cost lands on the lower end of typical ranges for such projects in the current market. Mixed-use buildings can vary widely in cost depending on their scale, design, and the region’s construction market. For context, recent construction cost data indicates that U.S. commercial building costs (spanning various types) can range roughly from around $240/SF in the most cost-effective regions up to $800+ in the priciest urban markets. Specifically, the Southern U.S. (including Atlanta) tends to be more cost-effective, with many commercial projects falling in the $240–$680 per SF range depending on complexity. Pure multifamily residential construction in secondary or tertiary markets often averages around $250–$300 per SF, while primary coastal markets see $400+ per SF for similar products.

Given those benchmarks, a blended cost of ~$210/SF suggests an efficient build for a smaller-scale mixed-use project. It likely reflects factors such as Atlanta’s moderate construction labor costs, a lower-rise wood-frame or similar construction type, and perhaps limited high-end finishes or amenities. By comparison, a mid-rise 4–7 story apartment building nationally averages anywhere from $210 to $475 per SF to build, and the national average for all multifamily construction is about $350 per SF as of 2023–2024. Our case study’s cost is below even the typical tertiary market range; this could be due to a combination of scope (e.g. only 12 units or a few stories), design efficiencies, or local market advantages (e.g. competitive bidding or reuse of an existing foundation or infrastructure).

It’s important to note that mixed-use projects sometimes incur a cost premium over single-use buildings because they integrate different uses (residential over retail, for instance) requiring more complex structural and MEP (mechanical, electrical, plumbing) designs. However, in return they can create more value and diversified income streams. In this Atlanta project, the cost appears well-controlled and within expected norms for a small mixed-use development in the region. Investors and lenders reviewing this budget would likely compare it to local cost databases and find it reasonable – perhaps even lean – for late-2025 given lingering inflation in construction. In sum, the $209.66/SF figure is competitive: it underscores that the project is not over-designed for its market, and it aligns with (or undercuts) the cost metrics seen in similar developments in the Southeast. This provides confidence that the project can be delivered at a cost that the local rents and sales prices can support, which is a key aspect of feasibility.

Feasibility Analysis: Informing Cost Planning, Financing, and Risk Mitigation

A project of this nature underscores the importance of conducting a thorough feasibility study before proceeding with development. Feasibility studies integrate hard cost estimates, soft cost assumptions, and financing terms to paint a full financial picture of the project, thereby guiding both investors and lenders. In this case, key financial assumptions – such as the 75% LTC construction loan, 6.75% interest rate, 25-year amortization with year-one interest only – were factored into the budget from the outset. By doing so, the feasibility analysis could calculate expected debt service requirements, size the interest reserve appropriately, and ensure that the projected income (from apartment rents and commercial leases) would meet lender criteria like the debt service coverage ratio. Lenders typically scrutinize metrics like LTC and DSCR alongside the cost breakdown and a robust feasibility study addresses these concerns proactively. For example, modeling the first year as interest-only (as assumed) helps in understanding the cash flow ramp-up period, and the study would test that the property’s stabilized net income can comfortably cover the full loan payments once amortization begins.

Beyond aiding in loan structuring, the feasibility process is invaluable for cost planning and risk management. It provides an opportunity to “stress-test” the project’s economics under various scenarios. What if construction bids come in higher than expected? What if lease-up takes longer, or interest rates tick up further before loan closing? A well-prepared feasibility study will include contingency plans and sensitivity analyses for such cases. In our budget, for instance, the 8.85% contingency and the conservative hard cost estimates reflect a cautious approach – likely informed by a feasibility evaluation that highlighted potential cost risks. Incorporating a healthy contingency and conservative leverage (75% LTC rather than the maximum available) are classic risk-mitigation strategies. Industry guidance emphasizes using conservative modeling, phased development strategies, and contingency planning to mitigate risks in mixed-use projects. This ensures that even if some assumptions prove optimistic, the project can absorb the impact without failing financially.

Feasibility studies also help in aligning the expectations of all stakeholders (developers, equity investors, lenders). By presenting a detailed project pro forma that breaks down costs (like we have above) and projects revenues, these studies enable investors to judge the potential return on cost and allow lenders to verify that the loan amount is justified by project value. They essentially answer the question: “Does this project make financial sense, and under what conditions?” A strong feasibility analysis will typically result in a go/no-go decision or prompt adjustments to the plan (for example, resizing the project, seeking cost savings, or altering the financing mix). In the context of this mixed-use development, the feasibility study likely confirmed that at ~$210/SF in construction cost, with expected rents or sales for both apartments and commercial space, the project meets the required return thresholds and loan covenants.

Moreover, feasibility assessments inform loan structuring details such as the need for interest reserves (as seen with the $125k reserve here) and appropriate equity contributions. The fact that the project is leveraged at 75% LTC means the developer is bringing ~$629k in equity. This equity not only provides a buffer (banks rarely finance 100% of costs) but also aligns incentives – the developer has significant “skin in the game.” Feasibility studies often test different financing scenarios (e.g., what if only 70% LTC is available, or if the interest rate were 7.5% instead of 6.75%) to ensure the project can withstand less favorable terms. In today’s environment of tighter monetary policy, such diligence is crucial, as financing costs can dramatically influence overall development feasibility.

In summary, the value of a comprehensive feasibility study for mixed-use developments cannot be overstated. It informs cost planning by providing a data-driven budget (like the one analyzed above), guides loan structuring by aligning the project’s needs with lender requirements, and reinforces risk mitigation by identifying where contingencies and conservative assumptions are warranted. As one industry guide notes, a structured process from initial feasibility analysis through project exit is key to securing financing and executing successfully. By front-loading this analysis, the development team and its capital partners gain confidence that the project’s cost estimates are realistic and that there are plans in place to handle the inherent uncertainties of construction. For investors and lenders reading a professional report such as this, the takeaways are clear: the project’s costs are well-benchmarked and justified, the financial structure is sound, and proactive measures (contingency funds, interest reserves, etc.) are in place to safeguard the investment.

Conclusion and Key Takeaways

From an investment and lending perspective, the mixed-use development in Atlanta appears to be carefully budgeted and feasibly structured. The construction cost breakdown reveals that most of the capital is going into tangible building value – with hard costs near 88.5% of the budget – which aligns with expected patterns and leaves little waste. Each cost component, from base construction at $121/SF to specialty systems like HVAC and sprinklers, has been quantified and put into context. Comparisons to national and regional benchmarks show that the project’s blended cost of ~$210/SF is competitive for its scope, suggesting efficient design and procurement. The inclusion of an almost 9% contingency and about 6% financing cost in the budget demonstrates prudent planning: these buffers and allowances reflect lessons learned from market volatility and protect the project’s viability. Finally, the emphasis on feasibility analysis and conservative financial assumptions (75% LTC, interest-only period, etc.) highlights a professional, institutional-quality approach to development – one that aligns with high-tier investment standards and lender expectations. By grounding the discussion in data and industry benchmarks, this report provides a clear, analytical view of the project’s costs and the rationale behind them, equipping investors and lenders with the insight needed to make informed decisions about funding and supporting the development.

December 1, 2025, by a collective of authors at MMCG Invest, LLC, multi-family, retail, and mixed-use development feasibility study consultants

Sources:

• Marshall & Swift/CoreLogic Cost Data – Mixed-Use Project Case Study (Atlanta, GA, 2025).

• Revizto Construction Cost Analysis (2025): National and Regional Cost per Square Foot.

• Multifamily Loans – 2025 Multifamily Construction Cost Guide: National Averages by Market Tier

• Maxx Builders – Guide to Commercial Construction Costs (2025): Typical Hard/Soft Cost Ranges and Contingency Recommendations.

• Autodesk Digital Builder – Commercial Construction Cost Breakdown and Financing Impact (2025)

• Crestmont Capital – Mixed-Use Development Financing Best Practices: Emphasis on Feasibility and Risk Mitigation