Commercial

“I want to buy a commercial unit but it is empty and lenders want a tenant”

Commercial mortgage lenders generally assess the rental income, so a vacant building has nothing to support the debt. The usual route is a commercial bridge to buy it, a letting campaign, then a commercial mortgage refinance once there is a tenant and a rent roll.

An illustrative situation, not a client case study. It describes the kind of enquiry this market sees. Any figures are examples, not a quotation, and no credit check or lender decision is involved in reading this.

Sound familiar?

The unit is vacant with no tenant in place
Commercial mortgage lenders have declined or offered very low leverage
You intend to let it, or occupy it with your own business
The purchase is time-sensitive

The situation

Vacant commercial property is priced for its vacancy. That is the opportunity — but it also removes the one thing a commercial mortgage lender relies on, which is income.

Buyers often discover this late, having assumed a commercial mortgage would work in the same way a residential one does. The sequencing is different: bridge, let, then refinance.

Why the usual lenders say no

Commercial lending is usually sized on rental income and interest cover, and a vacant unit has neither.
Vacant possession value is typically lower than investment value, so leverage falls as well.
Commercial valuations take longer, which rarely suits a motivated vendor.

What usually works

A commercial bridge on vacant possession value

Expect lower loan to value than on residential — often around 65% to 70% — because the security is harder to sell and the valuation basis is more conservative.

A letting strategy before you buy

Knowing who the likely occupier is, what rent is achievable and how long letting takes is what makes the exit credible.

Owner-occupier routes

If your own trading business will occupy the unit, an owner-occupied commercial mortgage may be available at better leverage once you are in.

Booking the valuation early

Commercial valuers are a smaller pool and their reports take longer. On a commercial case the valuation is almost always the critical path.

Roughly how the numbers look

Illustrative figures for this situation
Typical bridge loan to value	Around 65% to 70% of vacant possession value
Commercial mortgage once let	Often up to 70% for investment, higher owner-occupied
Term on the bridge	Commonly 12 to 24 months, allowing time to let
Exit	Commercial mortgage against the rent roll, or sale

Appetite varies enormously by sector. Standard retail, office and industrial are far easier to fund than specialist uses with a limited alternative occupier market. These are examples to show the shape of a deal, not a quotation. Work out your own figures in the bridging calculator.

What we would need from you

Details of the property, its use class and condition
Your letting strategy, with evidence of achievable rent
Company accounts if your own business will occupy it
Any planning consents, including prior approvals
Your exit: commercial lender appetite, or comparable sales
Proof of deposit and its source

Things that catch people out

Empty rates liability on vacant commercial property can be significant. Budget for it.
A long void period turns a workable deal into an expensive one. Be realistic about letting times.
If the building needs work to be lettable, that is a refurbishment case as well as a purchase.

Questions we get asked

Can I get a commercial mortgage on an empty building?

Rarely. Most commercial lenders want income to underwrite. The usual route is a commercial bridge to buy it, let it, then refinance onto a commercial mortgage once there is a rent roll.

How is a vacant commercial property valued?

Usually on vacant possession value, which is typically lower than the investment value it would have with a tenant in place. That gap is why loan to value on commercial bridging is lower than on residential.

What if my own business will occupy it?

That can improve things considerably. Owner-occupied commercial mortgages often allow higher leverage than investment lending, assessed on your trading accounts rather than on a tenant’s covenant.

The product that usually fits

See how it works

Every case is different. A specialist will confirm what actually fits yours.

Rather talk now?

020 4525 4876

9:00am – 5:30pm, Monday to Friday

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