What LTV can I get on an office property mortgage?

Prime office properties in good locations can attract up to 75% LTV from mainstream lenders. Secondary offices or those with shorter leases may be limited to 65-70% LTV. The exact LTV depends on location, specification, tenant quality, and lease terms.

Can I get a mortgage on a serviced office?

Yes, but it is more complex than traditional office lending. Lenders assess serviced offices as a business rather than a straightforward property investment. You will typically need to demonstrate an operational track record, strong occupancy rates, and sustainable revenue. Specialist lenders have developed products for this growing sector.

Do lenders consider EPC ratings when lending on offices?

Yes, increasingly so. From April 2023, it is illegal to grant a new lease on a property with an EPC below E, and the minimum is expected to rise to C by 2027. Some lenders already refuse to lend on offices below EPC C, and most factor energy performance into their risk assessment and property valuation.

How has hybrid working affected office property lending?

The shift to hybrid working has created a two-tier market. Lenders remain confident lending on prime, well-specified offices in good locations, which continue to see strong demand. However, they are more cautious about secondary offices in less accessible locations, where vacancy rates have risen and rental growth has stalled.

Can I finance an office-to-residential conversion?

Yes, but the financing depends on the scope of works. If the conversion requires significant building works, development finance or bridging finance is typically used during the construction phase, with a refinance to a residential mortgage or buy-to-let product once the conversion is complete.

Office Property Finance: A Commercial Mortgage Guide

Financing Office Property in the UK

**Office property** remains one of the most commonly financed commercial asset classes in the UK, accounting for a significant proportion of all commercial mortgage lending. Whether you are purchasing a single office unit for your business, investing in a multi-let office building, or financing a serviced office operation, understanding how lenders assess office property is essential to securing competitive terms.

This guide covers everything you need to know about office property finance, from lender criteria and market trends to practical application advice. For general information about commercial lending, see our [complete guide to commercial mortgages](/knowledge-hub/complete-guide-commercial-mortgages-uk).

Types of Office Property

The UK office market encompasses a wide variety of property types, each with different lending characteristics:

City Centre Offices

Prime office space in major city centres (London, Manchester, Birmingham, Leeds, Edinburgh, Bristol) is considered one of the lowest-risk commercial property types. These properties benefit from strong tenant demand, established rental markets, and deep investment liquidity.

Lenders are most comfortable with city centre offices, often offering maximum LTV (75%) and the most competitive rates.

Business Parks

Out-of-town business parks were a staple of 1990s and 2000s commercial development. While well-located parks with strong transport links remain popular with occupiers, some secondary parks have struggled with vacancy following the shift to hybrid working.

Lender appetite varies significantly depending on location, specification, and occupancy levels.

Suburban and Town Centre Offices

Smaller office properties in suburban locations or market towns serve the local professional services market, including accountants, solicitors, financial advisers, and small businesses.

These properties are well understood by lenders and generally attract good terms, provided they are in reasonable condition and sensibly priced.

Serviced Offices and Coworking Spaces

The **serviced office** sector has grown enormously since 2015, driven by flexible working trends. Financing these properties is more complex because the income is from short-term licences rather than long leases, making revenue less predictable.

Specialist lenders have developed products for this sector, but expect higher deposits and interest rates compared to traditionally let offices.

Converted Offices

Office buildings converted from other uses (or suitable for conversion) present both opportunities and challenges. Permitted Development Rights (PDR) have facilitated many office-to-residential conversions, but financing the conversion itself typically requires [development finance](/services/development-finance) or [bridging finance](/services/commercial-bridging) rather than a standard commercial mortgage.

How Lenders Assess Office Property

When applying for a commercial mortgage on office property, lenders evaluate several key factors:

Location and Accessibility

Office property values are heavily influenced by location. Lenders favour properties that are:

Well connected by public transport (particularly rail and motorway)
In established commercial areas with amenities
In locations with demonstrable occupier demand
In areas with positive economic outlooks

Building Specification

The physical quality of the office affects both tenant demand and lending terms:

Grade A offices: Modern, high-specification buildings with air conditioning, raised floors, modern lifts, and excellent energy performance. Command the highest rents and best lending terms.
Grade B offices: Older but well-maintained buildings that may lack some modern features. Still attractive to many lenders, especially if refurbishment potential exists.
Grade C offices: Older, lower-specification buildings that may be approaching obsolescence. Lenders are cautious, and these properties may require a clear strategy for refurbishment or alternative use.

Energy Performance

From April 2023, it became illegal to grant a new lease on a commercial property with an EPC rating below E. The government has signalled that this will tighten to a minimum of C by 2027 and B by 2030. Lenders are increasingly factoring energy performance into their assessments, with some refusing to lend on properties below EPC C.

This is a critical consideration for older office buildings. The cost of upgrading energy performance can be substantial, and lenders want assurance that the borrower has a plan and budget for compliance.

Tenant Quality and Lease Terms

For investment office properties, the tenant profile is central to the lending decision:

Blue-chip tenants (listed companies, government bodies, major professional firms) on long leases attract the best terms
SME tenants on shorter leases are acceptable to most lenders but at slightly reduced terms
Start-ups and micro-businesses on flexible terms are higher risk and may limit lender options

The unexpired lease term is particularly important. Lenders generally want to see at least 3-5 years remaining on the lease. Properties with leases expiring within 1-2 years may be treated as vacant for lending purposes.

**Key Takeaway:** The ideal office investment for lending purposes combines a good location, modern specification, strong EPC rating, and a quality tenant on a long lease with upward-only rent reviews.

LTV and Rate Expectations for Office Property

Office property generally attracts favourable lending terms compared to other commercial asset classes:

Owner-Occupier Office Purchase

LTV: Up to 75%
Rates: From 5.5% (high street banks) to 8% (specialist lenders)
Term: 15-25 years
Assessment: Business profitability and ability to service the mortgage

Investment Office Purchase

LTV: Up to 75% (prime); 65-70% (secondary)
Rates: From 5.5% (prime, strong tenant) to 9% (secondary, shorter leases)
Term: 5-20 years
Assessment: Rental income, DSCR/ICR, tenant covenant

Multi-Let Office Building

LTV: Up to 70%
Rates: From 6% to 9%
Term: 5-15 years
Assessment: Weighted average unexpired lease term (WAULT), tenant mix, void history

The Post-Pandemic Office Market

The office market has undergone significant structural change since 2020. Understanding current trends is important for both borrowers and lenders:

Hybrid Working Impact

The widespread adoption of hybrid working has reduced average office occupancy. Many businesses have downsized their office space or shifted to flexible arrangements. This has created a bifurcation in the market:

Prime, high-quality offices in good locations continue to see strong demand as businesses prioritise quality over quantity
Secondary offices in less accessible locations have experienced rising vacancy and falling rents

Flight to Quality

Tenants are increasingly demanding higher-specification offices with better amenities, sustainability credentials, and collaborative spaces. This "flight to quality" means premium rents for the best buildings while older, lower-specification stock faces declining demand.

Lender Response

Lenders have adjusted their approach accordingly:

Greater scrutiny of office property location and specification
More emphasis on EPC ratings and environmental sustainability
Higher stress testing for properties reliant on single tenants or sectors
Increased caution on secondary office locations
Greater appetite for well-let prime offices

**Key Takeaway:** The office market has polarised between prime and secondary. Borrowers purchasing prime, well-specified offices in strong locations will find lender appetite is robust. Secondary offices require more careful positioning and may attract less competitive terms.

Financing Serviced Offices and Coworking

The growth of serviced offices and coworking spaces has created new financing challenges. Traditional commercial mortgages are designed for properties with long leases providing predictable income. Serviced offices operate on a fundamentally different model:

Income comes from short-term licences (often monthly rolling)
Revenue depends on occupancy rates and operational management
The value is in the business as much as the property
Operating costs are higher than traditional offices

Lending Approaches

Lenders typically assess serviced offices using one of two approaches:

**Property-based lending**: Valuing the property on its traditional office use (ignoring the serviced office premium) and lending against that value. This produces a lower valuation but is simpler.
**Business-based lending**: Assessing the serviced office as a going concern, including the business goodwill. This can produce a higher valuation but requires detailed financial evidence and operational track record.

Lenders with appetite for serviced offices include **Shawbrook**, **Investec**, and some funds, though the market is evolving.

Financing Office Refurbishment

If you are purchasing an office building that requires significant refurbishment, the financing approach depends on the scope of works:

Light Refurbishment

For cosmetic improvements (redecoration, new carpets, minor fit-out works), a standard commercial mortgage may be appropriate, with the lender potentially releasing funds in stages or requiring the works as a condition of the offer.

Heavy Refurbishment

For structural works, full strip-out and refit, or change of specification, [bridging finance](/services/commercial-bridging) is typically used to fund the purchase and works, with a refinance to a long-term commercial mortgage once works are complete and the building is let.

Full Development

For demolition and rebuild or major structural change, [development finance](/services/development-finance) is the appropriate product, with funds released against construction milestones.

Tips for Securing Office Property Finance

Commission an EPC early: Understanding the energy performance rating before you commit to a purchase avoids surprises that could derail lending
Secure or improve tenancies: If the property is under-let or has short leases, negotiate improvements before applying
Present a clear business case: For owner-occupier purchases, demonstrate why owning the office makes commercial sense
Budget for fit-out: If the office needs tenant fit-out, have realistic costings prepared
Consider future-proofing: Lenders are increasingly interested in how the property will perform over the full mortgage term, not just today

Lenders Active in Office Finance

The UK office lending market is well served by a range of lenders:

High street banks (Lloyds, NatWest, Barclays, HSBC): Competitive for prime offices, established businesses, and larger loans
Challenger banks (Aldermore, Shawbrook, Allica Bank, Hampshire Trust): More flexibility on specification and tenant profile
Specialist lenders (Investec, Atom Bank, Paragon): Complex structures, larger lots, and specialist sectors

At Commercial Mortgages Broker, we work across all these lender categories to find the most competitive terms for your office property finance. [Contact us](/contact) to discuss your requirements.

*Written by Matt Lenzie, Founder of Commercial Mortgages Broker. Ex-Lloyds Bank & Bank of Scotland.*