Commercial Mortgages Broker Sector Dossiers UK commercial mortgage market, MMXXVI
Dossier 07 07

UK commercial mortgages

Leisure commercial mortgages

Gyms, nurseries and function venues are the awkward middle of UK commercial property finance. Not retail, not hospitality, not industrial, each one underwritten by a different sub set of the lender panel. Here is how leisure commercial mortgages actually price, with a particular focus on day nurseries where lender appetite remains strong.

Demand snapshot, May 2026

Sub sector specific lender appetite, day nursery remains the strongest

Leisure is not one sector but a collection of related uses that share an underwriting style without sharing a single lender appetite. Day nurseries are bankable across most of the panel. Gyms are bankable across a narrower pool. Function venues sit closer to hospitality underwriting. Studios and smaller leisure uses often work better as semi commercial deals or through specialist owner occupier routes. The right lender on a leisure file depends heavily on the specific sub sector.

Leisure is a label that covers a wider range of trading uses than borrowers usually expect. Day nurseries, gyms, function rooms, dance studios, soft play centres, trampoline parks, indoor sports halls, all sit under leisure for property purposes, but each has its own lender list, its own underwriting questions and its own LTV envelope. The single most useful thing we do on a leisure commercial mortgage enquiry is identify which sub sector the property actually sits in and which lenders are active there this quarter.

We arrange leisure commercial mortgages across the UK and the pattern across recent cases is consistent. Day nurseries with strong Ofsted ratings remain the easiest leisure files to write. Established gyms with sensible trading remain bankable. Niche leisure uses with limited alternative use require specialist routes and tighter pricing.

Day nursery commercial mortgages, the strongest leisure sub sector

Day nurseries deserve their own treatment because they are by some distance the most bankable sub sector inside leisure. Several factors combine to make day nursery commercial mortgages an attractive proposition for lenders. The demand for childcare in most UK locations is structurally strong. Government funded entitlements provide a meaningful proportion of nursery income, adding covenant strength. The regulatory framework around Ofsted inspection gives lenders an independent quality assessment. And the typical operator profile, experienced operators expanding from leased to owned premises, is well understood by underwriters.

Pricing for established day nurseries with Outstanding or Good Ofsted ratings sits at the tight end of leisure, 7.25% to 8.00% on five year fixed at 65% to 75% LTV. Owner occupier purchases by experienced nursery groups are routine business for a handful of specialist childcare lenders. Investment day nurseries with strong covenants and long leases also price well.

Gym commercial mortgages, post pandemic recovery now stable

The UK gym market completed its post pandemic membership recovery during 2024 and has traded steadily since. Lenders watch trading data carefully but are now comfortable to write established independent gyms at sensible LTVs.

Independent gyms with three years of post 2022 stabilised trading print at 7.75% to 8.75% on five year fixed at 60% to 70% LTV. Franchise gym freeholds with a strong national brand can price tighter, 7.50% to 8.50%, because the brand covenant adds to the file. New gym purchases by experienced operators with another trading site are also bankable. First time gym operators face a narrower lender list and wider pricing.

Function venues, between hospitality and retail

Function rooms, small event venues and party venues are underwritten using a mix of hospitality and retail rules. The trading covenant on the operating business is the lead, examined the same way we examine hospitality trading. The bricks underwriting reads more like retail, with attention to alternative use potential under Class E. Wedding venues and similar single purpose buildings face the tightest LTVs in the leisure sector because the alternative use case is weaker.

Studios, soft play and niche leisure

Smaller studio uses, dance, yoga, martial arts, often work as semi commercial deals where the operator lives nearby or on the premises, or as straightforward owner occupier commercial mortgages where the trading covenant supports the case. Soft play centres and family entertainment venues sit closer to hospitality from an underwriting standpoint and price accordingly.

The information pack that gets a leisure case done

For day nursery cases, expect to provide the latest Ofsted report, three years filed accounts, occupancy and fee mix data, operator CV and registration evidence. For gyms, three years filed accounts, monthly membership and revenue data, churn analysis and operator background. For function venues, hospitality style trading information including bookings forward book and average spend data.

Leisure is a sector where information quality drives outcome quality directly. The cases that move quickly are the ones where the operator can produce a clean information pack at first meeting.

Underwriting nuances unique to this sector

01

Day nurseries are read on Ofsted rating and occupancy

Day nursery underwriting starts with the most recent Ofsted inspection report. A Good or Outstanding rating is effectively expected for the better pricing. Requires Improvement adds 50 to 75 bps and tightens LTV. Inadequate halts the file. Occupancy rates over the last three terms, fee structure, government funded versus private fee mix, and registered capacity utilisation all sit on the underwriting page alongside the property file.

02

Gyms read on membership data and trading covenant

Gym underwriting examines membership count, average monthly revenue per member, churn rate and three years filed trading accounts. The post Covid recovery in gym memberships has been uneven, and lenders look closely at whether the trading has stabilised at or above pre 2020 levels. Franchise gyms with a strong national brand attached price tighter than independents at similar trading levels.

03

Function venue files sit between hospitality and retail

Function rooms, small event venues, party venues and similar uses are underwritten using a hybrid of hospitality and retail rules. The trading covenant is the lead, but the building flexibility and alternative use under Class E provides resilience that pure hospitality often lacks. Wedding venues, conference rooms and similar one off purpose buildings face tighter LTV caps because the alternative use case is weaker.

04

Licensing and regulatory compliance

Leisure uses typically require specific premises licences, particularly for childcare, food service or alcohol. Lenders want to see all current licences, any conditions or restrictions, and confirmation that licences transfer cleanly to the borrower on completion. Childcare registrations are tied to the individual provider as well as the premises, so the registration transfer process is part of the deal completion plan.

Worked example

Owner occupier day nursery purchase, £620k

Established nursery operator with eight years trading experience, currently leasing one nursery and buying second freehold to expand. Purpose built day nursery freehold, 60 place capacity, current Ofsted rating Outstanding. Three years filed accounts on existing nursery showing turnover £680,000 and net profit £128,000. New nursery has projected occupancy of 50 children at full ramp, scheduled to break even in month 9 and reach mature profitability in year 2.
  • Property type Owner occupier day nursery freehold
  • Purchase price £620,000
  • Loan amount £434,000
  • LTV 70%
  • Term 20 years
  • Rate 5 year fixed at 7.45%
  • Repayment basis Capital and interest, 20 year amortisation
  • Monthly payment circa £3,470
  • Annual debt service circa £41,700
  • Coverage on projected mature profit 2.10 times
  • Interest only period in ramp up 12 months

Placed with a challenger bank that has nursery expertise. The combination of established operator trading record, Outstanding Ofsted rating on the target nursery and clear ramp up projections delivered competitive terms with an interest only ramp period to manage cashflow through the occupancy build.

Lender appetite snapshot

  • Allica Bank

    Strong on owner occupier day nurseries with experienced operators, also active on independent gyms with established trading.

  • Cambridge and Counties Bank

    Sensible on nurseries and on selected leisure uses where trading is established, broker friendly process.

  • Aldermore

    Selective on leisure, prefers nursery and franchise gym files, less keen on niche leisure uses.

  • Shawbrook

    Active on leisure with hospitality crossover, including function venues and trading hotels with leisure components.

  • Specialist childcare lenders

    A small number of specialist childcare lenders write the bulk of day nursery commercial mortgages and deliver the tightest pricing in the sub sector.

  • Building societies

    Selective mutual lender appetite, particularly on smaller owner occupier nurseries and studio premises with strong trading.

Common deal breakers in this sector

  • Ofsted Inadequate rating on day nursery cases, file pauses until evidence of remediation
  • Gyms with declining membership over the last 24 months and no clear stabilisation
  • Single use function venues with no realistic alternative use, particularly purpose built wedding venues
  • Trampoline parks and similar higher insurance risk uses, some lenders decline at file open
  • Leisure operators with personal credit issues unresolved at the time of application