Most searches for commercial property finance in Melbourne turn up the same handful of concepts. Loan-to-value ratio, serviceability, tenant covenant. All accurate, all worth knowing. What actually decides whether a Melbourne deal gets approved is how those concepts land on a specific asset in a specific corridor, and that's where most generic explainers stop short.
Industrial in the western growth corridor reads completely differently to a lender than a strip retail shop in the inner north, even though both are technically "commercial property." Below is what we actually see lenders weigh, and where Melbourne's geography changes the answer.
For a detailed breakdown of how commercial property deals get structured and funded nationally, including every asset class, the three lender tiers, and a worked funding-mix example, see our national guide on commercial property finance in Australia. This page covers the Melbourne picture specifically.
What actually decides whether a Melbourne commercial property loan gets approved?
Four things carry the weight, and lenders rank them differently depending on the deal.
- Loan-to-value ratio (LVR). Sets how much a lender will lend against the property's assessed value, and it moves with the asset class, the tenancy profile, and the lender's current appetite. There's no single band that applies across every Melbourne deal, it's assessed deal by deal.
- Serviceability. Usually matters more than the headline LVR. It asks whether the property's income comfortably covers the loan repayments once the lender applies its own stress buffer for vacancy and rate movement.
- Interest cover ratio (ICR). A narrower related test that looks only at whether net income covers the interest cost before principal. Lenders set policy thresholds here and rarely move below them.
- Tenant covenant and lease structure. A strong tenant on a long, indexed lease is a different credit proposition to the same building on short, unindexed leases, even at an identical purchase price.
Does the asset type change what a lender is looking for in Melbourne specifically?
Yes, and this is where Melbourne's geography matters more than most buyers expect.
Industrial
The strongest tailwind category, concentrated in Melbourne's western and northern growth corridors, Truganina, Laverton North, Derrimut, Epping. Lenders look hardest at tenant covenant, functional layout, and proximity to freight routes.
Retail
The most fragmented category. A neighbourhood centre anchored by a national supermarket in a growth suburb like Tarneit or Cranbourne is assessed very differently to a strip retail shop on a fringe high street, even in the same postcode.
Office
The category that has drawn the most lender scrutiny recently. Lenders differentiate between well-located metro or suburban office, Southbank, Box Hill, Glen Waverley, and older B-grade CBD stock.
Mixed-use
Common through Melbourne's inner suburbs, where retail sits under residential or office. Assessed on whichever use drives most of the income.
Specialised
Childcare centres and medical suites near established hospital precincts sit in their own lane again, with appetite that shifts lender to lender. The right starting point is almost always a conversation about which lender has appetite for that specific asset type right now.
Does it matter whether you're buying to occupy the property or hold it as an investment?
It changes the entire assessment. Owner-occupied commercial property is assessed primarily through the operating business's cash flow and the value the premises contribute to that business. Investment commercial property is assessed on the rental income, the tenant's covenant, and the lease structure. The same building in the same Melbourne suburb can be fundable on materially different terms depending on which path it's structured through, worth getting right before a lender is even approached.
What's different between metro Melbourne and regional Victoria?
Metro deals generally have the deepest pool of comparable sales, giving valuers more to work with and lenders more confidence in the number they're lending against. Regional Victorian centres, Geelong, Ballarat, Bendigo, and smaller towns beyond, tend to have thinner sales evidence and less liquidity if a lender ever needs to sell the security. That usually shows up as a more conservative approach on the deal terms rather than a flat refusal to lend, and it's assessed deal by deal rather than off a fixed regional discount.
How does the valuation actually work?
Lenders order an independent valuation rather than relying on the purchase price. For income-producing property, the valuer typically works off a capitalisation of the net income, cross-checked against comparable sales where enough exist. Weighted average lease expiry (WALE), the income-weighted average length of the leases in place, feeds directly into that number. A property with a longer WALE has more contracted income certainty, which generally supports a stronger valuation than the same building with leases about to expire.
Frequently asked questions
Do I need a bigger deposit for commercial property in Melbourne than for a house?
Generally yes, because commercial property is priced and assessed on a different basis to residential. The exact figure depends on the asset class, the tenancy profile, and your own position, so there's no single number that applies across every Melbourne commercial deal.
Can I use my SMSF to buy commercial property in Melbourne?
Yes, through a limited recourse borrowing arrangement, a pathway commonly used by business owners buying the premises their own business operates from. The structuring sits with your financial adviser and accountant; our role is the lending side once that decision is made.
How long does commercial property finance take to settle in Melbourne?
It depends on the lender, the asset, and how much valuation and security work is involved. Bank-led deals on complex assets generally take longer than simpler transactions through a specialist non-bank lender.