Challenge and opportunity: how to succeed in the 2025 commercial real estate market

Borrowers can get an edge by appealing to lenders – particularly when the market is getting competitive

Are you wondering where the opportunities are in the 2025 commercial or buy-to-let mortgage market? Let’s take a look.

New lending for commercial real estate plummeted by 33 percent last year to the lowest point since 2013. For small and medium-sized enterprises (SMEs) in the UK, this means they may struggle to secure the finance needed to grow – meaning businesses could miss out on key growth opportunities.

Ed Brown, the Commercial Mortgages Funding Specialist at Swoop, says that the property market has been tough on SMEs: 

“2023 was a low point for the market in respect of new lending and transactions. Partly thanks to high commercial mortgage interest rates, there was a decline in appetite with development lending accounting for only 16 percent of all new lending.”

The impact of this was that buy-to-let (BTL) house purchase lending fell by 53 percent in 2023. Ed believes that the interest rate drop in mid-2024 was a key turning point for the market:

” Short-term interest rates are trending lower and gross lending was around £4 billion during Q2 in 2024, suggesting a more stable market. This will lead to an increase in the future.”

The interest rates have been lowered by the Bank of England because of slowing inflation and signs of economic stagnation; lowering commercial mortgage interest rates will result in economic growth by increasing investment in businesses and boosting gross domestic product (GDP).

A report by Bayes Business School, (formerly Cass) says that 42 per cent of the £170 billion of loans outstanding will have to be refinanced within 12 months. Ed says that this presents a significant opportunity for businesses with existing commercial mortgages: 

“Refinancing a loan can mean lower monthly payments and free up money to use for growth. That said, down valuations, cover ratios, EPC ratings, lender appetite and vacancies are making this a challenging market.”

Key factors to strengthen your application to lenders

There are a number of levers business owners can pull (or influence) to increase their chances of securing a loan. Here are three:

Down valuations – if a property is worth less than its original valuation, a lender will be less willing to loan against the higher figure. One way buildings lose value is through poor maintenance so ensure that your property is looked after.

Interest cover ratios – lenders use these to see the risk of lending their money to a company; it is therefore important for a business to demonstrate they are low risk. You should keep a close eye on your business costs, drive efficiency and show strong cash flow. 

Energy Performance Certificates (EPC ratings) – those with a better rating will have lower fuel bills, which means a better cash flow, appealing to lenders.

Conclusion

Lender appetite can vary because of factors outside a business’s control. By showing stability, low risk and strong cash flow, a business can put themselves in a good position to search the market for the funding they need. By putting yourself in the lender’s place, you can see your businesses through their eyes, and give yourself a better chance to secure the funding you seek.

If you are considering a commercial buy-to-let mortgage, buying a commercial property or have an outstanding commercial mortgage, get in touch with Ed and his team – and they’ll help to evaluate if you’re getting the best rates and terms.