Office Property Financing - Available Options

By
Mortgage and Lending with Commecial Second Mortgage, Inc

Office property financing is fairing relatively well in the credit crisis compared to other property types.  The success is attributable to the general use nature of the building type, and that many of the owners are occupants of the property.

Currently owner occupied financing is easier to get done than investment financing.  Owners of office building need to occupy, with their business at least 51% of the subject property to qualify for the best financing.   Owners can still expect to get 90% financing on purchases and 85% on refinances, with good rates that are often tied to the Prime rate.  Currently Prime is at historic lows at 4%.  These loan programs that are still closing are often tied to government sponsored programs, which explains a large reason for their stability. 

By general use, most lenders and banks are referring to the building, not being special purpose like a hotel or a restaurant for example.   With a restaurant, the only potential business type that could occupy the space would be another restaurant.  Thus limiting the pool of potential buyers and making the property type more risky for lenders in the case of borrower default.  And, making it more difficult for the banks to sell the building and re coup their capital.  Banks, when considering a making a loan assume that the borrower will default and structure their offering accordingly. 

Office property financing will likely continue to whether the storm as the government continues to back small business in general.  Also, due to the wide verity of business types that occupy office properties including strong segments of the economy like health care or fortune 500 corporations should help keep the stability of office building financing.    

 

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