California Commercial Real Estate Loan Rates

Rates updated May 29th, 2023

Loan Product Rates (start as low as) LTV
Commercial Real Estate Loan Rates 5.86% Up to 75% Get Free Quote
Single Tenant Lease Loan Rates 5.66% Up to 75% Get Free Quote
Business Real Estate Loan Rates 5.76% Up to 90% Get Free Quote
Click here for California Multi-family Loan Rates      

California Commercial Real Estate Loan FAQs

How has the Current Banking Environment Affected Commercial Real Estate in California?

Distress is currently low in the commercial real estate market. After Signature Bank and Silicon Valley Bank failed, there was widespread concern that other regional and local banks would fail due to the high levels of commercial real estate loans held in their portfolios. With the exception of some market sectors, most commercial mortgage portfolios have performed well. Usually, during times of market uncertainty, commercial real estate distress levels increase dramatically. Current levels of distress are low by historical standards. At the end of 2022, the level of commercial real estate assets under distress was only 1.2% of the total national sales volume. This number is important to watch as many loans face maturity and higher rates upon refinance in 2023.

MSCI, Inc. estimates the volume of loans maturing in 2023 at $400 billion. The Mortgage Bankers Association pegs the amount at over $700 billion. Many analysts predict that loan defaults will increase for two reasons: many of these maturing loans will need to be refinanced at higher rates (and may suffer cash flow problems) and there are fewer active lenders in the market due to the recent bank failures. Loan underwriting has tightened up as the result of global financial conditions and the average loan to value has been dropping on new originations. Many properties have been able keep pace with the market due to escalating rents and strong appreciation. Other properties, mainly in the office and retail sectors, have suffered due to higher vacancy factors and fixed long-term rental rates. Operating income growth has been strong in the multifamily and industrial markets, which represent about 35% of the maturities in 2023. Revenue growth in the office market has been flat for the past five years and vacancy rates have risen. This sector, which accounts for about 26% of 2023 maturities, is expected to see a significant increase in distress and defaults as many properties will not underwrite well enough to pay off existing loan balances.

In February 2023, Trepp Inc., a data analytics company, reported an increase of commercial mortgage-backed securities loans (CMBS loans) going into special servicing. They estimate the percentage of these loans at 5.2%. Many of these properties, including office buildings and retail centers, may be subject to distressed sales. In addition, many borrowers with adjustable-rate loans also face distress unless they hedged their risk with interest rate caps. These adjustable-rate borrowers are seeing current rates generate debt payments which exceed the net operating income of the property and an inability to raise rental rates to keep pace with the increases in debt service. Many of these borrowers will need to either sell the property in a distress sale or invest more capital into the property and refinance for lower loan amounts.

National, regional, and local banks hold more than half of the total amount of commercial real estate loans which will mature in 2023. So far, we have not seen distress levels high enough that would threaten the financial stability of these institutions. Most lenders are likely to extend impending maturity deadlines as opposed to foreclosing as foreclosure would cause losses. Many will employ other methods, including extensions and workouts, for the foreseeable future.

Most analysts agree that the problems encountered by Silicon Valley Bank and Signature Bank are not applicable to other small and local banks with commercial real estate portfolios. These two large bank failures were caused by much more specific situations. Silicon Valley Bank was too concentrated in the venture capital and technology sectors and did not diversify their lending. Signature Bank was too narrowly concentrated in the cryptocurrency sector, a market sector under intense scrutiny of federal regulators.

The commercial real estate market is very varied. There are many different sectors, geographic areas, and borrower types. Banks that lend to this market are able to diversify their risk by lending to a wide variety of borrowers and limiting their exposure to any one particular area or property type. Lenders who employ diversified lending practices and have conservative underwriting guidelines are likely to experience little or no distress or financial losses during this current market cycle.


In order to combat rapidly rising inflation, in 2022 the Federal Reserve aggressively raised short term interest in multiple 75 basis point increments. At the beginning of 2022, the yield on the 30 day treasury was 0.05%. As we near the end of 2022, the yield is 3.94%. The Federal Reserve has indicated that they will continue to raise short term interest rates in 2023 although at a slower pace and in smaller increments. Commercial mortgage rates are typically priced over the 10 year treasury notes. The longer notes are more market driven and less subject to Federal Reserve action. The 10 year treasury at the end of 2022 is in the range of 3.50% - 3.60%, and commercial mortgage rates are in the mid to high 5% range. The fact that long term rates are lower than short term rates indicates that economists expect the economy to slip into a recession. We will watch these trends closely during 2023.

In order to combat rapidly rising inflation, in 2022 the Federal Reserve aggressively raised short term interest in multiple 75 basis point increments. At the beginning of 2022, the yield on the 30 day treasury was 0.05%. As we near the end of 2022, the yield is 3.94%. The Federal Reserve has indicated that they will continue to raise short term interest rates in 2023 although at a slower pace and in smaller increments. Commercial mortgage rates are typically priced over the 10 year treasury notes. The longer notes are more market driven and less subject to Federal Reserve action. The 10 year treasury at the end of 2022 is in the range of 3.50% - 3.60%, and commercial mortgage rates are in the mid to high 5% range. The fact that long term rates are lower than short term rates indicates that economists expect the economy to slip into a recession. We will watch these trends closely during 2023.

Some California commercial mortgage lenders lock rates at application, some lenders lock rates at commitment, while others lock rates prior to closing. We are currently in the midst of an increasing rate environment. Rates quoted at application may increase dramatically during the loan application progress, if not locked. It is very important to understand your lender’s procedure upfront to avoid potential confusion.

In order for a commercial mortgage lender to issue a firm loan approval, they will want to understand the financial condition of the borrower, as well as the fundamentals of the property. The borrower will be expected to supply his personal financial statement showing total net worth and liquidity. He will also need to provide a schedule of real estate owned demonstrating experience managing similar properties. Lastly, the borrower’s credit scores will needed. For the subject property, lenders will look closely at the current rent roll, operating statements showing income and expenses, copies of all leases, and other pertinent property information.

Commercial mortgage rates are determined by many different factors, including property type, location of the property, loan-to-value ratio, debt service coverage ratio, debt yield, borrower’s net worth, liquidity, credit rating and level of experience. Commercial mortgage lenders look at all of these factors to determine the riskiness of the loan before setting rates. Loans with the lowest risk profile will get the best commercial mortgage rates. As the potential risk increases, commercial mortgage rates usually increase.

Commercial mortgage loans are viewed differently by lenders than residential loans. Home loan lenders look strictly at the borrower’s income and credit in order to qualify. Commercial mortgage lenders look at the subject property’s rent roll, operating statements, and other factors to determine the cash flow or net income potential. Very strong (low risk) commercial mortgage loans might be priced lower than home loans, while weaker performing properties (higher risk) might be priced higher.

Most commercial mortgage loans today are fixed for 5, 7, or 10 years and come with a 25-30 year amortization schedule. Loans can be recourse (personal guarantee) or non-recourse (no personal guarantee). Commercial mortgage loans typically carry prepayment penalties, whereas residential home loans usually do not. Specific terms will be determined by your lender’s underwriting team after your application is reviewed.

Commercial mortgage lenders typically lend up to 75-80% on an apartment purchase (down payment of 20-25% necessary). On other types of commercial property, commercial mortgage lenders will typically lend up to 70-75% (down payment of 25-30% necessary). An exception is for owner occupied business real estate (such as a business owner buying his own property). Owner/users may qualify for up to 90% LTV financing.

How do we help our California commercial mortgage clients get the best rate and terms?

California Real Estate Loan CA Commercial Real Estate Loan

Select Commercial is a leading California commercial real estate loan provider. We have excellent commercial real estate loan products and options available for owners and purchasers of commercial real estate throughout the state of California. While we lend across the entire continental United States, we are able to give our best commercial mortgage rates and loan programs to certain areas that we feel are strong markets. California is one of the states that we consider to be a premium market and we actively look to originate good quality loans here for our clients. As an experienced commercial mortgage professional, with over 30 years of lending experience, we have many sources of capital to choose from when placing a commercial mortgage request with a lender. Having many lenders to choose from gives us advantages over any one individual source. Finding the lender that fits the needs of each client is what we do best. In the end, you get the best rate and terms available. If you are looking to obtain a commercial real estate loan, don't hesitate to contact us. There are many reasons why our customers like doing business with Select Commercial. We have a simplified application process and we do not charge any upfront application or processing fees. We typically offer 24-hour pre-approvals with no-cost and no-obligation. Our long term fixed rates are excellent, and we look to close within 45 days of application. Our staff is professional and knowledgeable, and we look forward to working with you on your next commercial mortgage transaction.

California Commercial Mortgage Benefits

California commercial mortgage rates start as low as 5.09% (as of May 29th, 2023)
• A commercial mortgage broker with over 30 years of lending experience
• No upfront application or processing fees
• Simplified application process
• Up to 80% LTV on multi family , 75% on commercial (90% with SBA)
• Terms and amortizations up to 30 years
• Loans for purchase and refinance, including cash-out
• 24 hour written pre-approvals with no cost and no obligation

Recent TRUSTPILOT Reviews

Select Commercial Funding Reviews from TRUSTPILOT

A three year journey
"Thanks Stephen for all of your hard work in getting our deal closed! I appreciate your professionalism and patience throughout a complicated process. You always were there for my partner and I whenever we had questions and needed answers quick. It was a pleasure to have worked with you and Select Commercial!"

Commercial Mortgage Loans - Recent Closings

What is happening with California Commercial Real Estate Loans in 2023?

As we begin 2023, the California commercial real estate loan market is facing some obstacles and challenges.  In 2022, we saw rampant inflation and a corresponding rapid rise in increase rates initiated by the Federal Reserve.  Higher interest rates (and the resulting higher mortgage payments) caused many existing properties to experience cash flow problems, and many new sales to cancel due to cash flow.  Towards the end of 2022, we saw inflation start to lessen, but overall, inflation was still running at a rate exceeding 7% per year.  The Federal Reserve announced that they intend to continue to raise short term rates during 2023, although at a slower pace than 2022.  Their intent is to get inflation down to their target rate of approximately 2%.  Higher rates and tighter cash flow are expected to cause cap commercial mortgage rates to climb and commercial real estate values to drop.

While economists expect a slowdown in 2023, most are hopeful that we will not face a steep recession.  Corporate profits are strong and employment numbers are solid.  While some companies have started to announce layoffs, most believe that they will not be as dramatic as in past recessions.  Experts expect unemployment to remain below 6%, a positive sign that this recession will not be severe.  Economists expect that lower inflation might cause a softening or rates in the third and fourth quarters of 2023.

In 2023, the California commercial real estate market will be most strongly affected by the increased rates caused by the action of the Federal Reserve.  As we began 2022, the rate on the 10-year treasury was 1.63%.  As we begin 2023, this yield is at 3.84%.  Since most commercial mortgage loans are based off the 10-year treasury, many properties will not support high leverage commercial mortgages due to insufficient cash flow.  This will result in either:  sellers will be forced to lower asking prices, or sellers will not put their properties on the market in 2023.

There is some positive news for commercial mortgage loans in 2023.  Assuming the rate of inflation lessens, we might see a drop in commercial mortgage rates in the third and fourth quarters of 2023.  There is a record amount of securitized loans set to mature in 2023 in the commercial mortgage-backed securities (CMBS) market.  These loans will need to be refinanced and this high level of activity is likely to generate activity in the capital markets.

As we begin 2023, commercial mortgage rates are very volatile, and the market is expected to get off to a slow start.  We hope to see a leveling off effect later in the year and a resumption of activity later in 2023.

How will Covid-19, inflation and other factors influence commercial properties in 2023?

Office Commercial Real Estate Loans

California commercial real estate loan - office Office Loan
The Covid-19 pandemic negatively impacted the office sector of commercial real estate in a large way. Since the pandemic, a deep divide between primary and secondary office buildings has risen. This divide will likely continue to widen even further in 2023. There is a lot of demand for the nicest buildings in attractive locations. This demand will support rent growth in top-tier office towers. However, not many tenants seem to be interested in older office buildings. Thus, the demand for these secondary properties will continue to fall throughout 2023. Many lenders are hesitant to give commercial mortgage loans on office buildings right now. Investors will have to invest more equity to qualify for a loan on this asset class.

Industrial Commercial Real Estate Loans

California commercial real estate loan - industrial Industrial Loan
The US industrial sector is set for another strong year in 2023. While industrial leasing activity should slow down a bit, demand will keep up with supply in 2023. There will be solid rent growth and near record low vacancies in the industrial sector in 2023. Vacancy rates will remain well below the 10 year average and experts anticipate double digit rent growth in the sector. Additionally, 2023 should be the 13th straight year with positive net absorption in the sector. Some of the biggest factors driving industrial growth in 2023 are the increase in e-commerce and supply chain transformation initiatives. Commercial real estate lenders will continue to remain bullish on the industrial sector.

Retail Commercial Real Estate Loans

California commercial real estate loan - retail Retail Loan
Experts anticipate that the lack of new commercial retail supply will help the sector continue to bounce back from its decline during the pandemic. The rebound in retail sales which took place in 2022 is likely to continue in 2023. Although the market is dealing with high inflation and rising interest rates, high construction costs and lack of supply will help the retail sector to remain stable. Labor shortages is one other big factor that should impact the retail space in 2023. Retailers will continue to struggle to find employees to staff their stores. This should lead to many retail locations moving towards more technology solutions in place of human workers.

Hotel/Motel Commercial Real Estate Loans

California commercial real estate loan - motel Hotel/Motel Loan
Investment activity in the hospitality sector will likely remain subdued throughout 2023. Investment volume in the sector dropped 18% in Q3 2022 year-over-year. With decreasing revenues and increasing financing costs, this volume will likely have trouble rebounding in 2023. However, with the easing of travel restrictions, certain locations such as West Coast vacation spots should present investors with solid investment opportunities. In addition, as office attendance continues to increase, business travel will likely increase as well. This will help the hospitality industry in 2023.

What areas of California does Select Commercial provide financing?

Select Commercial provides commercial real estate loans throughout the state of California including but not limited to the areas below.

• Alameda • Alpine • Amador • AnaheimBakersfield • Butte • Calaveras • Chula Vista • Colusa • Contra Costa • CoronaCosta Mesa • Del Norte • El Dorado • El MonteElk GroveFontanaFresnoFullertonGarden Grove • Glenn • Humboldt • HuntingtonHuntington BeachInglewoodIrvine • Imperial • Inyo • Kern • Kings • Klamath • Lake • Lassen • Long BeachLos Angeles • Madera • Marin • Mariposa • Mendocino • Merced • Modesto • Modoc • Mono • Monterey • Moreno Valley • Napa • Nevada • OaklandOceansideOrangeOxnardPasadenaCorona • Placer • Plumas • Rancho Cucamonga • Riverside • Sacramento • San Benito • San BernardinoSan DiegoSan Francisco • San Joaquin • San Jose • San Luis Obispo • San Mateo • Santa Ana • Santa Barbara • Santa Clara • Santa Clarita • Santa Cruz • Santa Rosa • Shasta • Sierra • Simi Valley • Siskiyou • Solano • Sonoma • Stanislaus • Stockton • Sutter • Tehama • Thousand OaksTorrance • Trinity • Tulare • Tuolumne • Ventura • Yolo • Yuba • PalmdalePasadenaSunnyvaleSalinasRiversidePomonaVallejo