Retail with Offices Mixed-Use Proforma Calculator

Office and retail trade on different fundamentals. Office values are driven by tenant credit, weighted-average lease term (WALT), tenant-improvement spending, and submarket office vacancy — which in 2026 still varies wildly between Sunbelt growth markets and gateway CBDs. Retail values are driven by sales per square foot, occupancy cost ratios, and the strength of the anchor.

Forcing one cap rate onto both income streams understates whichever risk is higher and lets a weak component hide inside the strong one. The per-component method makes each underwriting assumption visible: change the office vacancy from 7% to 15% and watch the office value compress without touching the retail.

Brokers and investors use it to triage small CBD or main-street buildings (typically 20,000–100,000 SF total) where the office floors are commodity tenant space and the retail floor is a standalone use. It is also useful for adaptive-reuse pencils where ground-floor retail is being preserved while upper floors are repositioned from older office to modern multi-tenant office.

It is not the right tool for true creative-office or single-tenant headquarters buildings — those trade on credit and term and need a discounted-cash-flow run, not a direct-cap proforma.

Consider an 18,000-SF Class B office above 8,000 SF of retail on a mid-tier urban corridor. Office leases at $28/SF base with $7/SF expense recovery and 88% occupancy: roughly $554,000 of EGI, $138,000 OpEx, and $416,000 NOI. At an 8.0% office cap, that's $5,200,000 of office value.

Retail leases at $36/SF base with $10/SF CAM and 96% occupancy: $353,000 of EGI, $79,000 OpEx, and $274,000 NOI. At a 7.25% retail cap, the retail is worth $3,779,000. Combined value is $8,979,000, blended cap ~7.7%. At 65% LTV, the loan is $5.84M; at 7% for 25 years that's $497K of annual debt service and a 1.39× DSCR. The deal pencils for most conduit and bank lenders.

The single biggest mistake on retail-over-office in 2026 is underwriting office vacancy at pre-pandemic levels. Submarket structural vacancy of 12–18% is now common in many U.S. CBDs. If the rent roll shows 95% occupancy today on short remaining lease terms, the right structural vacancy for valuation is much higher than what's in place.

Second, watch TI/LC reserves. Office leasing in 2026 routinely demands $50–$120/SF in tenant improvements plus six months of free rent. Those costs belong above the line as either an OpEx reserve or a one-time deduction from value — pretending they don't exist inflates office value.

Third, do not double-count expense recoveries. The office expense-recovery PSF input here adds the recovery to other income; it should not also reduce the OpEx line. Recoveries are revenue, not contra-expenses, in this model.