For many commercial property owners, refinancing was once treated as a relatively straightforward process. A facility approached maturity, terms were compared, a lender was selected, and the debt continued under a revised structure.
That approach no longer reflects the reality of the market.
Commercial real estate finance in the UK has entered a more selective, more nuanced phase. Lender appetite has returned across parts of the market, but it is not universal. Some sectors are highly competitive, while others remain subject to detailed scrutiny. Increasingly, borrowers are finding that access to capital depends on far more than securing the lowest available rate.
Asset quality, lease structure, tenant covenant strength, income resilience, environmental performance, borrower experience, leverage, liquidity and exit strategy all carry meaningful weight in lender decision-making.
As a result, refinancing should not be viewed as an administrative exercise. It is a strategic event.
Recent research from Bayes Business School illustrates both the scale of opportunity and the pressure facing borrowers. On 11 May 2026, Bayes reported that new lending for UK commercial real estate rose by 29 percent last year to £52.7 billion, reaching its highest level in a decade. Around 60 percent of lending involved refinancing, with nearly one-third of CRE loans refinanced during the year. Bayes also estimates that approximately 19 percent, or £33 billion, of loans will mature during 2026 and require refinancing.
That is not simply another market statistic. It is one of the defining dynamics of the current lending environment.
A significant number of borrowers will be returning to the market at the same time, competing for lender attention in an environment where capital is available, but underwriting remains disciplined. Those who prepare early, structure their refinance carefully and present a coherent lending proposition are likely to achieve stronger outcomes than those who approach the market late and focus only on headline pricing.
Refinancing Is About More Than Replacing Debt
A refinance should not be viewed simply as the replacement of one facility with another. For experienced commercial borrowers, it can be an opportunity to realign the capital structure with the asset, the borrower’s wider position and the long-term investment strategy.
The right refinance can improve cash flow, extend debt maturity, release equity for acquisition or refurbishment, and reposition a borrower with a lender whose appetite better reflects the underlying asset. It can create flexibility for asset management initiatives, provide breathing space for stabilisation or support a broader portfolio strategy.
The wrong refinance can have the opposite effect.
A facility that appears attractive on rate alone may introduce restrictive covenants, inflexible amortisation requirements or limited headroom for future capital expenditure. It may increase refinancing risk later in the cycle or fail to accommodate changes in income, occupancy or valuation.
This is why rate comparison alone is not the only deciding factor in commercial finance. Pricing matters, but it is only one component of the overall structure.
In today’s market, much of the value sits in the detail: leverage, covenant flexibility, interest cover, amortisation profile, exit terms, lender appetite and the ability of the debt structure to remain workable under pressure.
The strongest borrowers are not simply looking for cheaper debt. They are looking for debt that supports the long-term plan for the asset.
An Active Market Is Not Necessarily an Easier Market
The latest Bayes data points to a market that is active, but selective. Lending volumes have risen, banks and non-bank lenders are competing more strongly in certain sectors, and pricing has improved for some prime assets.
That is encouraging for borrowers with strong assets and resilient income.
However, increased competition does not mean every borrower will find refinancing straightforward. Lender appetite remains fragmented.
Prime assets with strong occupational demand, high-quality tenants and robust environmental credentials may attract multiple offers. Secondary offices, transitional assets, properties with vacancy exposure, weaker income profiles or material capital expenditure requirements are likely to face more forensic underwriting.
Different sectors are also being assessed through distinct risk lenses. Industrial, retail, mixed-use, semi-commercial, office, HMO and development assets each bring their own considerations around income, liquidity, management, exitability and lender appetite.
For borrowers, this creates a challenge. Lender appetite is rarely obvious from the outside. A lender may appear highly active in the market overall while quietly avoiding a specific asset type, location or lease profile. One lender may be competitive on leverage but conservative on covenant flexibility. Another may provide structural flexibility but at a higher margin.
This is where presentation becomes critical.
Borrowers who approach the market with little more than a valuation and a funding request may find traction limited. Borrowers who clearly articulate the strength of the asset, the tenant profile, the business plan, the repayment strategy and the rationale for the refinance create the conditions for lenders to engage more constructively.
The Lender Landscape Has Changed
Commercial real estate lending is no longer dominated solely by the traditional clearing banks.
Bayes reported that UK banks’ share of the market fell from 40 percent to 36 percent, while debt funds increased their market share from 12 percent to 28 percent. Alternative lenders, including insurance companies, now hold 45 percent of outstanding CRE loans.
For borrowers, this creates both opportunity and complexity.
The opportunity lies in greater choice. Commercial borrowers may now be able to access challenger banks, debt funds, specialist lenders, private banks, insurance-backed capital providers, bridging lenders and development finance specialists.
The complexity lies in understanding how those lenders assess risk.
One lender may focus primarily on existing income. Another may lend against projections. Some lenders are comfortable with refurbishment and repositioning strategies, while others will only support fully stabilised assets. Certain lenders place greater emphasis on sponsor strength and liquidity; others focus more heavily on asset-level cash flow.
In this environment, lender selection becomes one of the most important parts of the refinance process.
The question is no longer simply: who is offering the lowest rate?
The more important question is this: which lender genuinely understands this asset, this borrower and this strategy, and which structure will remain appropriate three to five years from now?
Interest Cover Has Become Central
One of the clearest themes in the current market is the growing importance of interest cover.
Interest cover is no longer a secondary technical metric hidden within lender credit papers. In many transactions, it has become a central issue.
A property may have long-term value and a credible strategic plan, but if current rental income does not support debt servicing under a lender’s stress assumptions, refinancing can become difficult.
This is particularly relevant for assets in transition, including properties undergoing refurbishment, lease restructuring, tenant repositioning or occupancy stabilisation. In those cases, lenders need to understand not only the current income profile, but also the credibility of the borrower’s wider business plan.
Preparation therefore matters.
Rent schedules need to be accurate. Lease events must be explained clearly. Tenant exposure, arrears, capital expenditure requirements and valuation assumptions should be addressed before they become lender concerns. The refinance discussion should begin well before maturity, not once the current lender issues a renewal reminder.
The Economic Environment Still Matters
Commercial lending does not operate in isolation from the broader economy.
UK Finance’s May 2026 Monthly Economic Review confirmed that UK CPI rose to 3.3 percent in March, from 3.0 percent in February. The main contributors were transport costs, principally motor fuels, alongside a significant month-on-month increase in air fares. UK Finance also noted that persistent rises in energy costs are expected to feed through into the wider inflation basket as firms pass on energy and transport costs.
The Bank of England maintained Bank Rate at 3.75 percent at its meeting ending on 29 April 2026, with the Monetary Policy Committee voting 8 to 1 to hold. The Bank also noted that CPI inflation had increased to 3.3 percent and that the outlook for global energy prices remained highly uncertain.
For borrowers, this matters because lender pricing, stress testing and funding costs remain closely linked to the wider macroeconomic environment.
Even in an active market, lenders are underwriting for resilience rather than optimism.
That resilience may come from long leases, strong covenant tenants, conservative leverage, diversified income, sponsor liquidity or demonstrable asset management capability. For development or refurbishment transactions, it may come from planning certainty, contingency planning and robust exit analysis.
The market remains open for business. But it is disciplined business.
Development Finance Remains Active, for the Right Projects
One of the more positive findings in the Bayes review was the continued strength of development finance activity. Development financing accounted for 16 percent of new lending and 19 percent of total outstanding commercial real estate debt. Bayes also reported that lenders were keenest to provide development finance for logistics, residential and student housing schemes, with most looking for loan ticket sizes above £20 million and assets that are climate-resilient and aligned with carbon reduction targets.
That appetite, however, is highly selective.
Lenders want experienced sponsors, robust professional teams, clear planning positions, realistic cost assumptions and credible exits. Sustainability and environmental performance are also becoming increasingly important within underwriting.
For developers, this means projects must be presented as investable lending opportunities rather than attractive concepts alone.
The strength of the proposal often matters as much as the underlying site.
Asset Class Matters More Than Ever
Commercial property is no longer underwritten as a single market. Different sectors now attract materially different levels of appetite and scrutiny.
Industrial and logistics assets continue to perform strongly where occupational demand remains resilient. Prime offices with strong environmental credentials can still attract competitive lending terms, while secondary office stock may require more cautious structuring. Retail remains highly location and tenant dependent.
HMOs, specialist residential-backed assets and development sites each carry their own considerations around management quality, licensing, planning, build risk and exitability.
In practice, this means choosing the right lender is often just as important as choosing the right structure.
The Borrower Matters as Much as the Asset
Commercial lending may be secured against property, but underwriting decisions are also shaped by the borrower behind the transaction.
Track record, liquidity, management capability, wider balance sheet strength and the clarity of the borrower’s commercial rationale all play significant roles.
Strong refinance cases do not attempt to hide complexity. They explain it clearly.
If income has softened, lenders want to understand why and what is being done to improve it. If a lease expiry is approaching, they want to see the reletting strategy. If capital expenditure is required, they want visibility on costs, timelines and the expected impact on value and income.
Lenders do not expect every transaction to be simple. They do expect it to be coherent.
Timing Has Become a Competitive Advantage
In the current environment, time itself has become a strategic advantage.
Borrowers who begin reviewing refinancing options six to nine months before maturity have flexibility. They can explore multiple lender routes, address valuation issues, negotiate structure and avoid being forced into reactive decisions.
Borrowers who wait until the final weeks before maturity often find themselves operating from a position of reduced leverage.
That becomes especially important in a market where significant refinancing volumes are expected throughout 2026. As maturities increase, lender bandwidth, underwriting timelines and valuation capacity may tighten at different points during the year.
Early preparation gives borrowers options. Delayed preparation often narrows them.
Rate Is Visible. Structure Creates Value.
One of the most common mistakes in commercial refinancing is focusing too heavily on the headline margin.
The rate is easy to compare. The structure is where long-term value is often created.
A facility with a marginally higher rate may ultimately be more suitable if it offers stronger covenant flexibility, a better amortisation profile, more appropriate leverage or a cleaner exit strategy. Equally, a low-priced facility can become expensive if it restricts operational flexibility or creates refinancing pressure later.
Refinancing Is Now a Strategic Discipline
The current refinancing cycle presents both challenge and opportunity.
Some borrowers will find that structures which worked several years ago are no longer fit for purpose. Others will discover that lender appetite has shifted materially away from their asset type, leverage profile or income position.
At the same time, well-prepared borrowers can still access competitive capital and use refinancing to strengthen their position for the next stage of the market cycle.
The borrowers most likely to succeed will be those who treat refinancing as a strategic process rather than a transactional exercise. They will prepare early, understand the lender landscape, present the asset professionally and focus on long-term structural resilience rather than headline pricing alone.
In a market defined by selective appetite and disciplined underwriting, refinancing is no longer only about replacing debt.
It is about structuring debt with purpose.
Please note: This article is intended for informational purposes only and does not constitute financial advice. The information contained herein is based on market conditions and opinions at the time of publication and is subject to change without notice. This article may contain references to or summaries of market research reports or analyses prepared by external providers. Henry Dannell does not endorse or adopt the views expressed in any such third-party reports. We recommend that you review the original research reports before making any decisions based on their content. Please also note: a mortgage is secured against your home or property. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
