Can I get a commercial property loan on a vacant property?

The valuer estimates the market rent the property would achieve, deducts a letting-up allowance for the period it will take to find a tenant plus incentives and agent fees, and capitalises the result. That produces a lower value than the same property with a lease in place. Lenders then apply a lower LVR to that lower value. In a soft leasing market the two effects compound and the loan can be well under half the purchase price.

If your business is buying the premises to operate from, the lender assesses the business's financials to service the loan and treats the purchase as owner-occupied. This is a common and well-supported transaction. Lenders want two years of business financials, evidence the business can afford the repayments in place of the rent it currently pays, and a fit-out plan if the property needs work before occupation. Some lenders will fund part of the fit-out.

Buying an empty building as an investment is a leasing bet. Lenders want to see that you can service the loan from other income during the vacancy, a realistic leasing strategy from an agent, and a property that is genuinely lettable rather than obsolete. Loans are often shorter term with a review once a lease is signed, at which point the LVR can be increased and the loan refinanced on normal investment terms. Some investors use a private lender for the vacant period and refinance to a bank once leased.

A building with some tenants and some vacancy is assessed on the income in place plus a discounted allowance for the vacant space. A property with a tenant whose lease expires within twelve months is treated as close to vacant by many lenders unless the tenant has confirmed renewal. Lease expiries are one of the first things a lender checks on a commercial application.