US Office Lending Thaws: Where Capital Is Flowing and on What Terms
For the better part of three years, office was the sector that lenders wanted nothing to do with. Post-pandemic uncertainty, rising vacancy rates, and a wave of negative headlines turned what was once the bread and butter of commercial real estate lending into something closer to a four-letter word. Loan committees across the country treated office exposure like a contagion risk.
That's starting to change. Not everywhere, and not for every deal, but capital is returning to the US office market in ways that would have seemed improbable eighteen months ago. For borrowers with the right assets and realistic expectations, the financing window is cracking open.
The Shift in Sentiment
Several factors are converging to bring lenders back to the table. The most obvious: interest rates have come down meaningfully since the Federal Reserve began its easing cycle. Lower rates compress debt service obligations, which makes marginal deals pencil and strong deals look even better.
But the rate story alone doesn't explain the shift. What matters more is that price discovery has finally happened. Office valuations took their hit. Properties have traded at discounts of 30 to 50 percent from their 2019 peaks in many markets, and lenders who were paralyzed by uncertainty now have comparable sales to underwrite against. When a lender can point to recent transactions to justify their basis, the conversation changes entirely.
Occupancy data has helped too. While national vacancy rates remain elevated (hovering around 19 to 20 percent depending on the data source), the picture is far more nuanced at the asset level. Trophy and Class A properties in strong submarkets are posting occupancy rates well above the national average. Some are effectively full. The gap between the best and worst office buildings has never been wider, and that bifurcation is actually making it easier for lenders to underwrite selectively.
Who Is Lending, and to What
The first movers back into office lending have been debt funds and private credit platforms. These groups were never fully out of the market; they just repriced dramatically. Over the past two quarters, we've seen debt funds become genuinely aggressive on well-located, well-tenanted office properties, offering proceeds in the 60 to 70 percent LTV range at spreads that have compressed 50 to 100 basis points from their peak.
Regional and national banks are returning more cautiously. Most are still dealing with existing office exposure on their books and remain under regulatory scrutiny. That said, select banks are writing new office loans, particularly for stabilized assets with strong tenancy, weighted average lease terms above five years, and sponsors with a demonstrable track record in the sector. LTVs from banks tend to cap out around 55 to 60 percent for office today, with recourse still common on smaller deals.
Insurance companies and life company lenders are perhaps the most interesting piece of the puzzle. Several major life companies have started allocating to office again, but exclusively at the trophy end of the spectrum. We're talking about buildings with credit tenants, recent capital expenditure programs, and locations in core urban markets or top-tier suburban nodes. The terms are conservative (50 to 55 percent LTV, 10-year fixed rates) but the pricing can be remarkably competitive for borrowers who qualify.
CMBS has been slower to re-engage with office. Conduit pools remain underweight to the sector, and single-asset/single-borrower execution is limited to the largest, highest-quality deals. We expect this to evolve over the next twelve months as servicer performance data stabilizes, but for now, securitized lending is not where most office borrowers should look first.
What Terms Actually Look Like
Generalities only go so far. Here's what we're seeing across our deal flow for office financings that are getting done:
The common thread: lenders want tenant quality, remaining lease term, and capital expenditure stories they can underwrite with confidence. A half-empty building in a secondary submarket with near-term rollover risk is still extremely difficult to finance, regardless of the basis.
The Tenant Question
More than in any other sector, office lending today is really tenant lending. The single most important variable in getting a competitive financing quote is the credit quality and duration of the rent roll. A building that is 80 percent leased to investment-grade tenants on long-term leases will attract five or six competitive bids. The same building with a fragmented tenant base and two years of weighted average lease term might attract one, or none.
This has practical implications for how borrowers should approach the market. If you're considering a refinancing or acquisition financing, the work you do on leasing before going to market for debt can materially affect your cost of capital. Signing even one additional lease or extending a key tenant can shift the entire conversation with lenders.
Where We See Opportunity
The borrowers best positioned right now are those who acquired or refinanced office assets during the period of maximum distress (roughly 2023 through early 2025) at reset valuations. These sponsors bought at a basis that current lending terms can support comfortably, and many are now able to access permanent or longer-duration financing for the first time.
There's also opportunity in recapitalization. Owners who held through the downturn but are sitting on maturing loans originated at pre-correction values can now refinance at today's lower valuations, accept modestly lower proceeds, and lock in significantly better rates than they faced twelve months ago. The math isn't always pleasant, but it's workable, and the alternative (continued short-term extensions at penalty pricing) is worse for most.
We're also watching the conversion pipeline closely. While office-to-residential conversion has grabbed headlines, office-to-life-science and office-to-medical conversions are attracting dedicated financing programs from lenders who see more predictable demand fundamentals in those sectors.
How Borrowers Should Approach This Market
If you own or are targeting US office assets, our advice is straightforward: don't wait for the market to come to you. Lender appetite for office is improving, but it remains selective. The borrowers who are getting the best terms are those who present clean, well-structured opportunities with thorough tenant and market analysis upfront.
Run a broad lender process. The range of terms available for office deals is wider than in any other sector right now, which means the difference between your best and worst quote could be 150 basis points or more. A structured, competitive process can save meaningful dollars over the life of a loan.
Our team has been active in the office lending market throughout the cycle, including during the period when very few deals were getting done. If you're exploring office financing for an acquisition, refinancing, or recapitalization, we'd welcome the chance to discuss your situation and help you identify the right capital for the opportunity. Reach out to our team to start that conversation.