Commercial Mortgages

At Select Commercial, we are recognized for our expertise in commercial mortgage lending, with loans starting at $1,500,000. We strive to offer the best rates and tailored solutions for all types of commercial mortgage investments throughout the contiguous United States. Additionally, our services extend beyond these offerings. For a complete overview of rates on all loan products available in the 48 contiguous states, please visit our comprehensive commercial mortgage rates page.

Commercial Mortgage Financing In All 48 Contiguous States

Identify your state to obtain the most current data on commercial mortgage loans relevant to your region.


Frequently Asked Questions

What type of commercial property should I consider purchasing in 2023?

Inflation fears, high interest rates, and the prospect of recession have slowed the pace of the commercial real estate market considerably. Some property types are outperforming others. Apartment buildings in desirable neighborhoods are performing well, as owners have been able to raise rents and keep up with rising interest rates. Multifamily properties in smaller and less desirable areas, or areas where unemployment is rising, are not performing as well, as rent increases are harder to implement. In the office sector, only medical office buildings are generating lender interest. General office properties have underperformed the market as a result of the work from home policies established during the Covid-19 pandemic. Office demand is unlikely to return to pre-Covid levels making the office sector extremely hard to navigate right now. In the retail sector, essential service businesses, such as grocery stores and pharmacies, are performing well, while traditional brick and mortar retailers are still feeling the effects of Covid-19 and the competition from online retailers. Many malls are experiencing record high vacancy levels, and some are being repositioned for other purposes. In the industrial sector, we are seeing strong demand for warehouse and distribution space to accommodate the online retailers. Industrial space in urban markets and close to transportation are performing very well. We expect to see sales prices for underperforming properties to drop in 2023 as investors gravitate to better positioned properties.

 

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 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 rates. As the potential risk increases, 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.

Commercial Mortgage Benefits

Commercial mortgage rates start as low as 5.31% (as of March 19th, 2024)
• 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 multifamily, 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 Recent Closings

Commercial Real Estate Loan Commercial Real Estate Loan

Select Commercial, a nationwide commercial real estate lender and broker, has excellent commercial real estate loan products and options available for owners and purchasers of commercial real estate and apartment buildings throughout the country. We specialize in financing apartment building loans, office building loans, retail center loans, industrial building loans and warehouse building loans, hotel loans, motel loans, and single tenant loans. We provide commercial real estate loans in the following areas. If you are looking to purchase or refinance commercial real estate, please feel free to contact us today. We arrange commercial real estate lending for the following property types:

Apartment Loans

Apartment loans, sometimes referred to as multifamily loans, have traditionally constituted the largest portion of our total business volume. We are experts in securing apartment loans and mixed-use mortgages. We have over 30 years of experience working on apartment loans.

Office Building Loans

Office Building Loans may be multi-tenant office and medical buildings or single use, owner occupied properties that house the owner’s business.  We prefer offices located in central business areas in good urban and suburban locations.

What is the outlook for office building loans in 2023?

We are seeing a drop in consumer spending due to increased inflation and higher costs. Businesses are also seeing higher operating costs which is affecting payroll at many companies. These conditions are typical of many past recessions. Current data suggest either job losses or a very slight job gain in 2023. Higher energy costs, higher interest rates, and the war in Ukraine are contributory factors. The slower job market will affect household formation and the ability of employees to relocate to other climates for work. Many older office properties that are at risk of prolonged vacancy are being converted and repositioned for other use. This should remove some office space from the market. During the Covid pandemic, we saw many short-term leases being signed, as tenants were not ready to commit to long term leases. Many of those short-term leases are coming up for renewal just as the economy is slowing down. Even Class A office space is challenged as the national vacancy rate for this sector was at 16% last year. Lenders and investors continue to seek properties with long-term, high-credit, stable tenants. Lower rated and short term tenants are not in favor now, and those properties will be underwritten extremely cautiously. Borrowers looking to refinance debt on these properties are finding it very difficult right now. The rate increases by the Federal Reserve severely impact the office sector, as the goal of these rate hikes is to cool the labor market. Obviously, a rise in unemployment is bad for the office sector. A higher percentage of sales in the sector or occurring with buyers who are interested in conversion or redevelopment, especially if the property is older and has high vacancy. Medical office space has been immune to this trend, as these properties generally have a positive investment outlook. Commercial mortgage lending in this sector will be challenging, and commercial mortgage rates will not be very aggressive as lenders assess the risk in this market.

Retail Building Loans

Retail building loans may be shopping centers, retail strip centers, or individual stores, including single tenant NNN leased properties, such as drug stores and fast food stores.  We prefer properties with good occupancy rates and good historical performance.

What is the outlook for retail building loans in 2023?

Higher interest rates, lower job prospects, and higher overall prices will cause many consumers to limit their spending this year to mostly essential goods like food and fuel. While fuel costs have moderated, the war in Ukraine and cutbacks in OPEC production could cause prices to rise again. If lower gas prices continue, we might see an increase in road trips and an increase in consumer spending, aiding retailers along travel routes and lodging facilities. High home prices and high residential mortgage rates will decrease demand for home furnishings and building materials. Retailers are responding by making smaller store formats and experimenting with short-term pop-up stores. These pop-ups are expected to help shopping centers deal with the high number of recent move-outs. Domestic business will be slow again this year as employers deal with hiring freezes and job cuts. Tenant quality is extremely important to investors and lenders. Retailers in the “essential services” categories, such as grocery stores, pharmacies, and other health related services, should perform better than the overall market. Distressed sales may increase this year due to a combination of lower sales and rising interest rate costs. Many low-rate loans are maturing this year, and borrowers will have difficulties with cash flow at today’s higher debt service costs. We are seeing lower vacancy rates in smaller and rural markets as compared to major urban markets. Many investors will be searching out opportunities in these markets this year. Suburban locations that have experienced large increases in apartment leasing recently are expected to also do well this year. Shopping centers that are not performing well are slowly being repositioned to other uses. Many large big-box stores in underperforming malls are being transitioned to medical and hospital use, event spaces, and other non-retail uses. Commercial mortgage lenders will look closely at the quality of the tenant base, length of leases, and demographic data when lending in this market sector.

Self Storage Loans

Self storage is an industry where rooms, lockers, containers, and/or units are rented on a short term basis to individuals and businesses, usually on a month-month basis.

What is the outlook for self storage loans in 2023?

During an expected decline in the job market, many high school and college graduates might delay entering the workforce. This would limit household formation and self-storage needs among this group. Older singles facing higher rents and other higher living costs, may start taking in roommates to help with their budgets. This consolidation could benefit the self-storage sector, as many individuals would need a place to store their belongings. For married couples, many in this group are putting off home purchases due to higher costs and higher interest rates. This group will likely need increased storage capacity for items that can not be stored in their apartments. In the over 65 age category, many older individuals are starting to downsize their living spaces. This group will likewise increase utilization of storage spaces. Smaller Midwestern and Sun Belt locations are seeing increased storage needs, as individuals moving from larger Northern cities are creating a high rate of demand. Lenders such as local banks and credit unions are very actively lending in this sector, especially projects that are showing continued, positive cash flow. The self-storage sector has always performed very well in economic slowdowns and recessions, as people need a place to store their goods while they downsize or relocate. The demand for these properties is strong, causing cap rates to be pushed lower and lower. Many developers are looking to reposition older, vacant assets and redevelop these properties into storage facilities. Many investors target Sun Belt locations as retiring seniors typically downsize in these markets and need to take advantage of self-storage properties. Triggered by the Covid pandemic, self-storage properties have been showing lower vacancy rates and higher cash flow than competing asset classes. Commercial mortgage lending will remain active in this sector, for both existing and new development.

Hotel Loans & Motel Loans

Select Commercial specializes in hotel and motel loans. Hospitality lending requires a lender that really understands and specializes in lending to hotel owners. Most conventional lenders do not have this particular expertise and reject hotel mortgage requests. Select Commercial has a special expertise in providing both hotel and motel loans.

What is the outlook for hotel and motel loans in 2023?

The hotel and motel sector was devastated during the Covid pandemic. Many markets (including leisure locations in Florida and Texas) have rebounded nicely, while many urban markets (such as New York City and San Francisco) have not fared as well. Lower gas prices could aid road travel, so long as global concerns (the war in Ukraine and the cutback in OPEC production) do not escalate. High inflation rates are causing a strain on household budgets and many individuals will delay or take less expensive trips this year. Some travelers may opt for more cost-effective locations this year and travel to smaller locations by car. This might help boost economy and budget motel chains. Developers with an eye to the future have started construction on higher end properties in major markets as they anticipate future demand. Business travel and trade shows were non-existent during the Covid pandemic and some of that traffic has returned to normal, although recession fears and the potential for job market declines is an overriding concern for many businesses. Underperforming hotels will face some pressure this year refinancing maturing debt given higher rates and tightening credit guidelines. High interest costs and the high cost of new building materials is expected to limit new construction. The higher risk in this category has yielded higher cap rates on investor’s capital. The average hotel cap rate is now at 8.5%, significantly higher than the return on other asset classes. Larger cities on the West Coast are seeing an uptick in travel from Asia as many Asian countries have lifted their quarantine requirements. Employment in the hotel sector is improving as many workers who were laid off during the pandemic are returning to work and properties are opening up again. Commercial mortgage rates in this sector this year will be dependent on location, occupancy statistics, cash flow, condition of the property, etc. Lenders will be lending, but cautiously.

 

Industrial Property Loans – these may be warehouses, distribution centers, and/or manufacturing facilities.  Properties may be multi-tenant or owner occupied.
Single/Special Use Loans – these loans may be offered on hotels/motels, gas stations, restaurants, and for other single use purposes.  Many of these properties are owner occupied by the owner’s business.  We consider these properties as Business Real Estate Loans.
Apartment Building Loans – these properties may be garden apartments in suburban locations, high-rises in urban areas, small apartments, underlying cooperative loans, student housing near college campuses, manufactured housing communities and mobile home parks.
Self Storage Loans – self storage is an industry where rooms, lockers, containers, and/or units are rented on a short term basis to individuals and businesses, usually on a month-month basis.
1031 Exchange Loan – 1031 Exchange is a technique used by real estate owners to defer capital gains taxes upon the sale of a commercial property as long as they purchase another qualifying commercial property within certain IRS delineated timelines.
Mobile Home Park Loan – We are pleased to offer mobile home park loans for the purchase or refinance of mobile home park properties nationwide.
Investment Property Loans – any income producing property not specifically discussed above will be considered.

Our company has over 30 years of experience in the commercial real estate market and offers multiple capital sources for these commercial real estate loans, including: national banks, regional and local banks, insurance companies, Wall Street conduit lenders, credit unions, agency lenders (such as Fannie Mae and Freddie Mac), and private lenders. Whether you are purchasing or refinancing, we have the right solutions available. We will entertain loan requests of all sizes, beginning at $1,500,000. Click here to get started with a free loan quote.