Through every quarter of 2025, UK banks told the Bank of England that credit for commercial property was becoming easier to obtain. The<\/span> Credit Conditions Survey published in July 2026<\/span> recorded a cooler reading. Lenders reported only a slight increase in availability for the commercial real estate sector in the three months to the end of May. They expected no change over the following three months, the first time since the start of 2025 that banks had not expected availability to rise.<\/span><\/p>\n UK banks increased their new commercial property lending by 29% in 2025, according to the full-year figures in<\/span> Bayes Business School\u2019s May 2026 lending report<\/span>. Their share of the market shrank anyway. Non-bank lenders grew faster still, and their new lending rose 51%. The report\u2019s author placed the fall in the banks\u2019 share within a decline that stretches back more than a decade, to the arrival of debt funds in the UK market.<\/span><\/p>\n Lenders spent 2025 competing hard for the best buildings, with UK banks lowering the rates on loans secured against prime offices by 45 basis points and debt funds lowering theirs by 30. A thin pipeline of new construction left lenders fighting on price for existing business. Around 60% of all lending went to refinancing. When lenders do fund new schemes, Bayes found, they gravitate toward logistics, residential and student housing, and most look for loans above \u00a320 million on buildings that are climate-resilient and aligned with carbon reduction targets.<\/span><\/p>\n Market power has also gathered at the top. By the end of 2025, just 20 lenders held 69% of UK commercial property loans and wrote 72% of new ones, a concentration Bayes suggested may reflect the difficult conditions of recent years. For owners of large, modern, well-let buildings, the price competition has meant cheaper debt. For owners of smaller, older or partly empty buildings, a market concentrated in fewer hands is likely to offer fewer options.<\/span><\/p>\n Bayes estimated that around \u00a333 billion of UK commercial property loans, roughly 19% of the market, would mature in 2026, and higher interest rates have worn down the margin of safety on many of them. At the end of 2025, some 13% of the loans Bayes tested had interest cover below 1x, a level at which the rent a building produces falls short of the interest on its debt. In 2016 the figure was 1%. Only 37% had cover above 2x, down from 73% in 2017. The report\u2019s author warned that with cover this thin, the loss of one tenant could be enough to tip a loan into default.<\/span><\/p>\n Lenders with office or retail loans written in 2017 or 2018 are among those most likely to have booked losses, according to the report, and retail was the riskiest property type for losses over the three years to the end of 2025. Between 15% and 20% of loans carry no covenant giving the lender a right to intervene ahead of a default, so some problems come to light only once a payment is missed.<\/span><\/p>\n Lenders cut defaulted loans to 3.8% of their books by the end of 2025, down from 6.3% in the middle of the year, against a long-term average of 3%. The buildings left behind by that clean-up are likely to be those that need work. Lenders surveyed by Bayes said they wanted climate-resilient, well-let assets, and a building that needs refurbishment, new tenants or a change of use before it can meet that standard falls outside that profile.<\/span><\/p>\n An owner whose bank declines to refinance a building that needs work can put in fresh equity to reduce the loan, turn to a costlier lender willing to take the risk, or sell. Each route carries its own cost, in the form of diluted ownership, higher interest or a sale price that reflects the building as it stands, and an owner without the funds to refurbish a building may also lack the equity to keep it. For many owners of secondary offices and shopping centres, the first two routes can be expensive enough that a sale becomes the practical answer.<\/span><\/p>\n Buyers for those buildings are often<\/span> turnaround specialists who fix what others walk away from<\/span>, investors who earn their return by re-letting space, upgrading the building and rebuilding the income it produces. In that corner of the market, the ability to do the work counts for more than the price paid. A discount on a half-empty building becomes a return only once the space is let again, and getting there takes leasing skill, construction experience and patient financing that no buyer can assemble overnight.<\/span><\/p>\n Each refinancing a bank declines moves a building closer to an owner prepared to change it.<\/span><\/p>\n Banks told the Bank of England in July 2026 that they expected credit availability for commercial property to hold flat after a year of steady increases. With \u00a333 billion of loans reaching maturity in 2026, the flow of such buildings toward new owners is likely to continue well beyond 2026.<\/span><\/p>\n \t <\/div>\n![\"\"](\"https:\/\/dailybusinessgroup.co.uk\/wp-content\/uploads\/2026\/10\/pexels-joaquin-carfagna-3131171-18111345.jpg\")
Photo by Joaquin Carfagna: https:\/\/www.pexels.com\/photo\/cityscape-of-london-18111345\/<\/figcaption><\/figure>\nBanks Stay Close to Prime<\/span><\/h2>\n
The Loans That Are Hardest to Roll Over<\/span><\/h2>\n
Where the Assets Go<\/span><\/h2>\n