Commercial property finance is the lending used to acquire, refinance, or develop income-producing real estate. The asset can be a single warehouse, a multi-tenancy retail centre, an office building, or a specialised facility like a childcare centre or medical suite. The financing question always comes down to the same three variables: what the asset is, how the income from it is structured, and how the buyer's position fits the deal.
This page is asset-class-led because that is the single largest driver of how lenders price and structure commercial property loans. Industrial deals behave differently from retail. Office sits in a different credit environment than it did five years ago. Specialised assets have their own appetites that change quarter to quarter.
The audience is investors, owner-occupiers, developers, and SMSF buyers looking to understand the lending landscape before approaching a broker. If you have a specific deal in mind, the fastest path is a 30-minute call where we look at the asset, the lease profile, your position, and indicative terms.
Asset classes we finance
Different commercial property categories sit in different credit environments. The questions a lender asks, the structures that work, and the appetite that exists in the market right now all change with the asset class.
Industrial
Warehouses, manufacturing premises, logistics and distribution facilities, light industrial complexes. E-commerce growth has materially lifted demand for last-mile distribution, and lenders generally view well-located industrial as the most fundable commercial real estate category. What matters: tenant covenant, functional layout, location relative to freight infrastructure, and the weighted average lease expiry (WALE) of the lease profile.
Retail
Strip retail, neighbourhood centres, single-tenant retail, food and beverage premises, large format. Lender appetite has tightened post-COVID, particularly for discretionary retail and some CBD locations. Tenant mix, anchor covenant, foot traffic, vacancy history, and lease structures all feed the assessment. A neighbourhood centre anchored by a national supermarket on a long lease gets treated very differently from a strip of discretionary retail in a fringe location.
Office
The most lender-scrutinised commercial category over the past three years. Hybrid work has changed occupancy economics, and lenders have responded with tighter terms in some locations, particularly B-grade CBD assets. Well-located metro and suburban office has held up better. Lenders treat office as a tenancy-led credit decision: tenant quality, WALE, vacancy profile, recent re-lease evidence, and required capex over the loan term.
Mixed-use
Two or more uses on the same site, most commonly retail at ground with residential or office above. Lender treatment depends on the dominant use and the income split. Retail-plus-residential where most income comes from the residential side gets assessed primarily as a residential investment. Retail-plus-office with a more even split gets assessed as commercial. Structuring matters more here than on pure asset classes.
Specialised
The catch-all for asset types that do not fit the standard four categories. Specialised includes childcare centres, medical and allied health premises, accommodation (hotels, motels, serviced apartments), service stations, self-storage, agribusiness real estate, and other purpose-built assets. Each sub-class has its own lender appetite, credit nuance, and pricing. Some lenders have dedicated teams for specific sub-classes. Others will not engage at all. For specialised assets, the right starting point is almost always a conversation about which lender has appetite for that specific asset type right now.
How lenders assess commercial property loans
The credit fundamentals are consistent across lenders. The relative weight on each one is where lenders differ.
- Loan-to-value ratio (LVR). How much the lender will lend against the property's assessed value. The threshold depends on the asset class, the tenancy profile, the buyer's profile, and the lender. LVR is the headline number most buyers ask about. On most commercial property deals, the binding constraint is actually serviceability, not LVR.
- Serviceability. Whether the property's income comfortably covers the loan repayments and operating costs. Lenders apply a buffer to stress-test for vacancy, interest rate movements, and capex needs. This is the metric that most often determines whether a deal funds.
- Interest cover ratio (ICR). Whether the property's net income covers the interest cost on the loan, before principal repayments. Lenders set policy thresholds and rarely move below them.
- Tenancy profile and WALE. Tenant covenant quality, lease structure (gross, net, fixed, CPI-linked), and weighted average lease expiry. A property with strong tenants on long leases is materially more fundable than the same property with shorter leases or weaker covenants.
- Asset condition and capex. Recent capex history, near-term capex requirements, building condition assessment. Lenders factor the cost of maintaining the asset over the loan term into the structure.
- Buyer profile. Commercial property experience, existing portfolio, and what other security is available.
Owner-occupier versus investor
Lenders assess these differently. Owner-occupied commercial property is assessed primarily through the lens of the operating business's cash flow and the value the property contributes to that business. Investment commercial property is assessed primarily on the rental income, the tenancy profile, and the lease structure. The two paths use different credit policies, different LVR thresholds, and different serviceability buffers. If you are acquiring a property for your own business operation, the deal is structured fundamentally differently from acquiring the same property as an investment.
Where lenders differ
Three tiers fund commercial property deals in Australia, and they are not interchangeable. Picking the right tier on the first attempt is most of the work of getting a deal funded.
Big 4 banks
Deepest balance sheets and the most competitive cost of funds, with credit policy that reflects the scale and prudential requirements of major bank lending.
Lowest cost of fundsChallenger banks
SME and commercial property focus. Cost of funds typically higher than Big 4, but often a better fit for non-standard tenancy profiles or sub-market locations.
Profile flexibilityPrivate credit & non-bank
The right answer for deals with tight timelines, complex stories, or assets that do not fit a standard bank box. Highest cost, fastest decisions.
Speed and flexibilityThe funding mix
Most commercial property deals are funded with three components, with a fourth layer added for larger or more complex transactions.
- Bank debt. The main funding source, typically structured as a commercial term loan repaid from the property's net income. The loan can be amortising over the term, partially interest-only, or fully interest-only depending on the lender and the deal. The amount and pricing of this layer drives the headline economics.
- Working capital line. A standby facility for capex, leasing incentives, or vacancy buffer. Particularly important for properties with near-term lease renewals or buildings needing capex over the loan term.
- Buyer equity. The cash the buyer puts in at completion. Sets the floor that the rest of the structure is built around.
For larger acquisitions or development transactions, additional layers of finance can sit between the bank debt and the buyer's cash, often from a specialist lender. These cost more than the primary bank loan but reduce the cash the buyer needs to bring on day one.
For development transactions specifically, the structure looks different again. Construction loans are progressively drawn against build milestones, capitalise interest during construction, and convert to a holding loan on completion. Each stage has its own credit policy and pricing.
The headline LVR a lender quotes is not the binding constraint on whether a deal funds. The binding constraint is whether the full funding mix works as a whole, including the standby line and any capex reserves. Designing the structure before approaching lenders is what separates deals that close cleanly from deals that grind through multiple processes.
These are indicative descriptions of the most common layers. There is no formula for how they should combine on a specific deal. The right combination depends on the asset, the buyer, the tenancy profile, and the timing.
A representative worked example
The example below is a composite based on typical FGO commercial property deal patterns. Numbers and identifying details are anonymised. The point is the shape of the structure, not a specific transaction.
The deal
A neighbourhood retail centre in a metro Melbourne corridor. Four tenants including a national grocery anchor, two food and beverage tenants, and a personal services tenant. WALE of just under five years at the time of acquisition. The buyer is an existing commercial property investor with one industrial asset already in their portfolio, looking to add diversification.
The funding mix
| Layer | Source | Notes |
|---|---|---|
| Bank debt | Commercial property lender | Amortising commercial term loan, mix of fixed and variable rate components |
| Working capital line | Same lender | Standby capex facility for two scheduled lease renewals in years two and three |
| Buyer equity | Investor cash | Cash contribution at completion |
Why the lender approved the deal
The anchor tenant covenant was strong and the lease structure included indexation. The investor had a track record on commercial property over multiple cycles. Serviceability with the proposed debt comfortably exceeded the lender's policy threshold even when stress-tested for vacancy on the smaller tenants. The capex reserve plus the standby facility addressed the lender's concern about near-term lease renewal costs.
Outcome
The deal moved from accepted offer to settlement in around 14 weeks. Both lease renewals in years two and three came in at headline rents above the underwriting assumptions. The investor has since refinanced into a new facility with extended interest-only terms.
Most commercial property deals that close in Australia look something like this. The exact mix changes with the asset class, the tenancy profile, and the buyer, but the underlying pattern of bank debt plus a standby line plus equity is the workhorse structure for income-producing commercial property.
Our process
We work with buyers and existing property owners from initial deal review through to settlement. The path is consistent across deal types.
Initial deal review
We assess the asset, the tenancy profile, your position, and the proposed structure. Credit issues flagged before you commit DD spend.
Indicative terms
We approach two or three lenders for indicative pricing and structure before you spend on formal DD.
Full application
Once the deal is firm, we prepare and submit the package the credit team needs to approve cleanly.
Approval to settlement
We manage conditions precedent and coordinate between lender, solicitor, valuer, and vendor.
Frequently Asked Questions
How much deposit do I need for a commercial property loan?
Deposit requirements depend on the asset class, the tenancy profile, the buyer's position, and the lender. There is no single answer that applies across all commercial property deals. Owner-occupied transactions are assessed differently from investment purchases. The right number for your specific deal is something we work out in the initial deal review.
What is LVR and why does it matter on a commercial property loan?
LVR stands for loan-to-value ratio. It is the proportion of the property's assessed value that the lender will lend. The threshold depends on the asset, the lender, and the rest of the deal profile. LVR is the headline number most buyers ask about, but on most commercial property deals the binding constraint is serviceability, which is whether the property's income comfortably covers the loan repayments.
Can I use my SMSF to buy commercial property?
Yes. Self-managed super funds can acquire commercial property through a Limited Recourse Borrowing Arrangement (LRBA). The lending is structured differently from a personal-name or company purchase, with the loan recourse limited to the property itself rather than other SMSF assets. SMSF commercial property lending is its own specialist segment with a narrower set of lenders. We work with the SMSF compliance and structuring sides as part of the deal review.
What is the difference between owner-occupier and investor commercial property finance?
Owner-occupied commercial property is being bought to operate a business from. The lender assesses the deal primarily through the operating business's cash flow plus the value the property contributes to that business. Investment commercial property is being bought to generate rental income. The lender assesses the deal primarily on rental income, tenant quality, and lease structure. The two paths use different credit policies, different LVR thresholds, and different serviceability assessments. The same property can be fundable on very different terms depending on which way it is structured.
How long does commercial property financing take?
From accepted offer to settlement, expect roughly eight to sixteen weeks depending on the lender, the asset, and the security work involved. Bank-led deals with valuations on complex assets typically run longer. Specialist non-bank lenders can move faster on simpler structures. We provide a more specific timing read at the indicative terms stage.
What is WALE and why does it matter?
WALE is the weighted average lease expiry across the tenants in a multi-tenancy commercial property, weighted by income. It tells the lender how long the income from the property is contracted for. A property with a high WALE (five years or more) has more contracted income certainty than a property with a low WALE, which affects how much the lender will lend and on what terms.
Can I get an interest-only commercial property loan?
Yes. Most commercial property loans offer interest-only periods, either for the full term or for an initial period before reverting to principal and interest. The length and structure of the interest-only period depends on the lender, the asset, and the buyer's overall position. Interest-only periods are particularly common on investment commercial property where the buyer is managing cash flow during a stabilisation phase or a lease-up.
Can I refinance an existing commercial property loan?
Yes. Refinancing is one of the most common reasons investors come to us. The most frequent triggers are an existing loan rolling off a fixed term, a change in the property's income profile (new leases, capex completion, vacancy resolution), or a buyer wanting to release equity for the next acquisition. We assess the existing facility, the current asset position, and what the market will offer, then run the refinance through to settlement.