Commercial property loans Australia 2026 — the complete guide for owner-occupiers and investors.

Commercial property lending in Australia operates under a different prudential framework, different lender risk policy, and different credit-team workflows from residential. The differences are not cosmetic — they shape every aspect of the deal.

Why commercial lenders are tougher

The reasoning compounds across multiple layers:

1. APRA prudential capital framework. Commercial loans require lenders to hold more regulatory capital than residential, which they price through.
2. Volatility of value. Commercial property values can swing 20%+ in a downturn; residential is generally less volatile.
3. Income volatility. Commercial rental income depends on tenant solvency, lease renewals, and vacancy risk — all more volatile than salary income or owner-occupied repayments.
4. Sector concentration. A 90% LVR loan on a Sydney CBD office with a single 2-year lease is genuinely riskier than a 80% LVR house in a stable suburb. The market reflects this.

What this means for you

• Plan a larger deposit than residential.
• Plan longer timelines — 4–8 weeks for credit decision is normal.
• Plan higher upfront costs — valuation, lender legal, IM preparation.
• Plan to refinance every 3–5 years — commercial loans are reviewed at term and re-priced; sometimes you stay, sometimes you move.

These aren’t deal-killers — commercial property is a fundamentally good asset class for many investors and businesses. They’re just real differences from residential, and being prepared makes the process smoother.

Commercial real estate splits into four broad asset classes, and lender appetite, LVR, and pricing differ meaningfully between them.

Office

CBD A-grade, suburban office, professional suites. Generally medium risk. Tenant covenant matters: government, ASX-listed, or large national tenants attract sharper pricing than small local businesses. Post-COVID, office sector lending has tightened — lenders ask harder questions about WALE and tenant occupancy patterns. Typical LVR: 60–70%.

Risk factors lenders weigh: Tenant credit quality; remaining lease term; building grade and amenity; location and oversupply risk in the suburb; capital expenditure required for tenant fit-outs.

Retail

Strip retail, neighbourhood centres, sub-regional, and free-standing retail (Bunnings-style). Highly tenant-dependent — strong national-tenant retail ("Coles-anchored", "Bunnings-anchored", "Woolworths-anchored") attracts the sharpest pricing in the entire commercial sector. Small local retail with multiple short-WALE tenants is at the riskier end.

Lender hot buttons: Anchor tenant covenant strength; remaining lease term; foot traffic catchment; competition; e-commerce displacement risk for the specific retail format.

Industrial / logistics / warehouse

Industrial sheds, distribution centres, logistics hubs, light industrial complexes. Generally the lender favourite in 2026 — e-commerce-driven demand has kept this asset class strong since 2020. Strong national-tenant industrial assets often get the best commercial terms in the market.

Lender hot buttons: Tenant credit; clear span and ceiling height; access (truck movement, dock loading); zoning compliance; environmental factors (contamination risk).

Mixed-use

Building with a combined commercial and residential component — e.g., shop-top housing where the ground floor is retail and upper floors are residential. Lender treatment varies: some treat the whole building as commercial; some allow the residential portion to be valued separately and lent on residential terms (often a hybrid loan).

Specialist sectors

• Medical, pharmacy, childcare: strong covenant industries; often attract sharper pricing because of stable government-funded income or national operator backing.
• Self-storage: rising sector through 2020s; lender appetite varies.
• Hospitality (pub, hotel, restaurant): specialist; few lenders; higher rates.
• Service stations: specialist; environmental remediation risk.

How asset class affects pricing

Comparing approximate pricing for a $2M commercial loan at 65% LVR to a strong investor borrower in 2026 (illustrative, not a quote):

Sit-and-quote rates published online are a guide — commercial pricing is risk-priced individually based on your specific deal characteristics.

Commercial lending splits into two big categories with different rules, different rates, and different best-fit lenders.

Owner-occupied commercial

You’re a business owner buying premises for your own business to operate from. You service the loan from business income; the property is your business security as well as the loan security.

Why it’s often advantageous:

• Sharper rates: lenders give credit for "double security" — your business covenant + the property.
• Simpler servicing: the lender assesses the loan against business cash flow rather than rental income; if the business is stable, this is often a stronger story than tenanted investment.
• No tenant risk: you control whether the building is used.
• SMSF possibility: for the right business owner, holding owner-occupied commercial in SMSF (with the business leasing it back at arm’s length, under specific rules) can be one of the most tax-effective long-term structures available. See our SMSF lending guide for detail.

Documentation typically required:

• 3 years business tax returns and financials.
• Personal tax returns and statements of position for directors/owners.
• BAS for past 4–8 quarters.
• Lease (if buying through SMSF and leasing back).
• Asset and liability schedule for the business and individuals.

Investment commercial

You’re buying as an investor; the property is leased to one or more tenants who pay rent. You service the loan from rent (and your other income, depending on structure).

Different lender focus:

• Lenders look hard at lease covenants — who the tenants are, how strong their credit is, how long the lease has to run.
• WALE (weighted average lease expiry) matters — a 5-year-plus WALE is generally treated favourably; under 2 years, lenders heavily discount the income for credit purposes.
• Rental income haircuts apply — typically 70–85% of contracted rent counted in serviceability.
• Vacancy stress testing — lenders model what happens if the building is partially or fully vacant; you must service the loan through that scenario.

Documentation typically required:

• All current leases.
• Rent roll.
• Tenant covenant evidence (tenant financials if a small private company; ASX listing data if listed).
• Property valuation.
• Personal/corporate financial statements.

When the choice isn’t obvious

Some borrowers blur the line — e.g., buying a property where part is leased to others and part is occupied by the borrower’s business. These deals are commercial investment for credit purposes but with the borrower’s business as one of the tenants. Tenant relationship needs to be at arm’s length on commercial lease terms for the structure to hold up.

Commercial credit assessment is fundamentally about debt-service coverage: does the income from the property (or business, for owner-occupied) reliably cover the interest and required principal payments under stress?

Two related metrics:

Interest Cover Ratio (ICR)

ICR = Net rental income (after operating expenses) / Annual interest expense

A common minimum lender requirement is ICR of 1.50–1.75x — i.e., net rental income must be at least 1.5–1.75 times the annual interest cost.

Worked example:

• Property: $2,200,000 industrial shed.
• Loan: 65% LVR = $1,430,000 at 7.04% IO.
• Annual interest expense: $1,430,000 × 7.04% = $100,672.
• Required gross rent at ICR 1.50x: $100,672 × 1.50 = ~$151,000 gross income.
• After ~10% operating costs (rates, insurance, body corp): net ~$135,900 = 1.35x. ICR fails.
• After ~10% operating costs and rent of $172,000 gross: net ~$155,000 = 1.54x. Passes.

This is why commercial lenders care so much about rent levels relative to debt size.

Debt Service Cover Ratio (DSCR)

DSCR = Net rental income / Total debt service (principal + interest)

DSCR is stricter than ICR because it includes principal repayments. Common minimum: 1.20–1.30x.

For loans on amortising terms (P&I), DSCR is the relevant metric. For interest-only loans, ICR is typically the focus.

How to improve your DSCR/ICR

If the deal’s metrics don’t hit lender thresholds:

1. Higher equity (lower LVR). Cuts the loan size, cuts interest, lifts cover ratio.
2. Cheaper lender / better rate. Some lender categories charge less, easing cover ratio.
3. Longer amortisation. Stretches principal repayment, easing DSCR but not ICR.
4. Owner-occupied conversion. If you’re buying for your own business to occupy, the assessment shifts to business cash flow, often more favourable.
5. Wait for rent review. If the property has a contractual rent review coming up that lifts rent meaningfully, time the deal accordingly.

Sensitised ICR — the lender stress test

Lenders apply a sensitised rate above current rates to model what happens if rates rise. Typically: actual rate + 2.0–3.0%. So a 7.04% loan is tested at 9.04–10.04%. The deal must still meet ICR thresholds at the sensitised rate.

This is why it’s critical to size the loan from the outset using sensitised math — not just the rate quoted today.

Commercial lender categories are different from residential. Knowing which lane your file fits is half the battle.

Major banks (CBA, NAB, Westpac, ANZ)

Strong on prime files, established borrowers, large or institutional-quality assets, and SME owner-occupiers. Generally:

• Sharpest rates on prime deals.
• Strict policy — deals outside the box trigger long credit reviews.
• Slower processing than non-banks (often 6–10 weeks for first-time commercial files).
• Best for: A-grade or B-grade assets with national tenants, strong borrower covenants, LVR ≤70%.

Mid-tier banks (Macquarie, Suncorp, Bendigo, BOQ)

Sharp competition for mid-market deals ($1M–$10M); often more flexible than majors on policy quirks. Macquarie in particular has been notably aggressive in commercial since 2020.

Specialist commercial banks (Judo, Westpac Commercial, MyState)

Some lenders carve out specific commercial-focused offerings. Judo Bank in particular focuses on SME lending with relationship-led credit assessment.

Non-bank specialist lenders

La Trobe Financial, Pepper Commercial, Liberty, Thinktank, Resimac. Funded mostly through securitisation; more flexible policy than banks; often faster.

• Rates typically 0.50–2.00% above major banks.
• Higher LVRs sometimes available (up to 75–80% in stronger files).
• Faster decisions (often 2–3 weeks vs 6–8 from majors).
• Best for: deals majors decline; complex structures; tight timelines; first-time commercial borrowers; impaired credit history.

Private credit / non-bank construction

For development finance and very specialist commercial deals, private credit funds operate at higher rates (often 9–15%) for short-term funding. We refer to specialist debt advisors when private credit is the right answer — it’s a different market from standard commercial.

How brokers help in this market

Commercial broking is genuinely valuable because the lender choice can swing pricing by 1.0–2.5%, swing LVR by 5–10%, and swing approval times by weeks. Lender appetite changes monthly with their balance sheet; the right lender for your deal today may be different from the right lender 6 months ago. Broker market knowledge — not just panel access — is what creates value.

Composites built from real client scenarios with names and numbers altered. Illustrative only.

Case study A — Owner-occupied medical practice

The borrower: Dr Sandhya, GP and practice owner. Practice runs from a leased premises; lease coming up for renewal at higher rent. Considering buying the freehold instead.

The property: $1,650,000 freestanding medical clinic in a regional NSW city.

The numbers:

• Practice revenue: $1.2M pa; net profit $245k pa after Sandhya’s drawings.
• Personal income (Sandhya): $185k from the practice.
• Existing residential mortgage: $480k at 6.04%; PPR worth $1.2M.

The strategy: Owner-occupied commercial loan — practice leases the building from Sandhya’s individual ownership at arm’s length market rent. Lender assesses business covenant alongside the property.

The structure:

• Loan: $1,155,000 at 65% LVR = $1,072,500.
• Plus stamp duty ($90k) + GST handling + legal/setup ($25k) + valuation ($3k).
• Total cash from Sandhya: ~$695,000 (sourced from offset on PPR loan + practice retained earnings + family contribution).
• Rate: 6.84% with mid-tier bank, 5-year IO, 20-year amortisation.

Cash flow:

• Annual interest: ~$73,400.
• Annual rent (paid by practice to Sandhya): $124,000 (market rate).
• Net income before tax: $50,600 — ICR 1.69x. Comfortable.
• Practice saves the cost differential between $124k market rent and the previously paid $145k landlord rent.

Outcome: Settled in 8 weeks. Practice signed a 5-year lease at market. Sandhya holds the building personally (CGT discount available on eventual sale); deductible interest against the rental income; depreciation schedule ordered.

Key lesson: Owner-occupied commercial often gives the best of both worlds — a sharper rate (because of the dual-security structure), a tax-effective income split, and removal of landlord risk. The structuring needs accountant input to align lease, ownership, and tax treatment.

Case study B — Investor refinance, multi-tenant office

The investor: Greg, established investor, holds a small inner-Brisbane office building purchased 4 years ago.

The property: $3,400,000 office building, 6 tenants, gross income $310,000 pa, current WALE 3.2 years.

The existing loan: $2,210,000 at 8.84% with non-bank specialist (taken at acquisition because the property was vacant 30% at the time and majors declined). 5-year interest-only term, with 12 months remaining.

The opportunity: Building is now fully tenanted; WALE has stabilised; refinance to a major bank at sharper pricing.

The new loan:

• Refinance to major bank at 7.14% IO (previously paying 8.84%).
• Same loan size: $2,210,000 (LVR 65%).
• Annual interest saving: ~$37,500/year.
• Refinance costs: $4,500 (legal + valuation) + 12 months’ break cost on the old facility ($18,000).
• Net 12-month saving: ~$15,000; after the first year, full $37,500/year saving.

Outcome: Refinanced in 9 weeks; total interest saved over the new 5-year facility ~$170,000 vs the old.

Key lesson: Commercial property refinancing is regularly worthwhile when the lender lane changes — but break costs and refinance fees ($20k+ on commercial deals) require the rate gap to be material. We model breakeven before recommending.

Case study C — SMSF buying a small industrial unit

The trustees: Family SMSF (corporate trustee). Members: husband and wife, mid-50s. Combined SMSF balance $720,000.

The property: Industrial unit (warehouse + small office) in a mid-suburban industrial estate. Listed at $560,000. Single tenant on a 5-year lease, paying $42,000 pa gross.

The strategy: SMSF buys the unit under a Limited Recourse Borrowing Arrangement (LRBA). Long-term hold; concessional tax treatment within super.

The structure:

• Bare trust set up to hold the property until the loan is paid out.
• Deposit from SMSF: $190,000 (after stamp duty $24k, legal/setup $6k, LRBA setup $3k).
• Loan: $370,000 at 65% LVR. Rate 7.34% IO at a specialist SMSF commercial lender (Thinktank).
• Annual interest: $27,160. Annual gross rent $42,000. Net rent (after rates, insurance, body corp): ~$36,000. ICR 1.32x — inside lender threshold.
• Tax inside SMSF on net rental income: 15% concessional.

Outcome: Settled in 11 weeks (SMSF and bare trust setup added time). Property delivered net cash flow of ~$8,800/year inside super, plus capital growth exposure.

Key lesson: SMSF commercial lending is specialist — only a handful of lenders will lend to SMSF on commercial assets, and the LRBA setup adds complexity and cost. For business owners who can lease the property back to their own business at arm’s length, the structure is one of the most tax-effective in Australian SMSF. Always engage a specialist accountant; we coordinate the lending side.

1. Comparing rates across asset classes. A $2M industrial deal at 6.8% and a $2M office deal at 7.5% aren’t directly comparable — different lender lanes, different risk pricing.

2. Buying with short remaining WALE. Lender heavily discounts a 1.5-year WALE; the deal looks worse on credit even if rent is high.

3. Forgetting GST cash flow at settlement. A $1.1M contract may include $0.1M GST you fund at settlement and reclaim later. Plan the cash flow gap.

4. Underestimating fees. Commercial setup fees, legal, valuation, IM preparation total $5k–$25k+ on most deals. Build into the cost.

5. Mid-deal appetite changes. Lender appetite for a sector or asset class can shift between approval and settlement. We monitor this through to draw.

6. Mixing residential and commercial expectations. Commercial timelines (4–8 weeks credit; 6–10 weeks to settle) are real — don’t commit to a 30-day finance clause.

7. Picking the wrong amortisation. A 15-year amortisation on a $2M loan means much higher repayments than the residential 25-year equivalent. Test sensitised cash flow.

8. Not stress-testing for vacancy. What if the lead tenant leaves at lease expiry? Plan for 6–12 months of vacancy in the file model.

9. Cross-collateralising commercial with residential. Tying a commercial deal to your home can leverage borrowing today but creates restructuring problems for the next decade. Default to stand-alone security.

10. Forgetting the lease review. Commercial leases run 5–10 years; clauses (rent reviews, options, make-good) materially affect deal value and lender treatment. Get a property lawyer to review every clause.

• APRA — Prudential standards on commercial real estate — the framework that drives lender capital allocation.
• Property Council of Australia — sector data and research.
• Real Estate Institute of Australia (REIA) — commercial property market data.
• ATO — Commercial property — GST and tax treatment.
• ASIC RG 273 — broker compliance.
• Australian Property Institute (API) — commercial valuer standards.

Ready to talk?

Send a brief outline: asset type, purchase price or refinance balance, tenancy story, deposit/equity available, your timeframe. Call me on 0400 77 77 55 or send a short enquiry. Free pre-assessment, no obligation, on a business day.