Demand snapshot, May 2026
Selective lender appetite, EPC and tenant covenant dominate pricing
Lenders are not pulling out of office, they are pulling apart office. Grade A modern stock with an EPC B rating, a recognisable tenant and a weighted average unexpired lease term over four years is still trading at the tight end of our rate range. The same building with an EPC D and a covenant the underwriter cannot place will either get repriced 75 bps or fall out entirely. We have seen four lenders quietly drop traditional, sub EPC C office from their published appetite in the last six months without announcing it.
Office is the UK commercial mortgage sector going through the deepest underwriting shift right now, and it is the sector most likely to surprise an owner occupier or investor who has not borrowed against an office in the last three years. The lenders we work with daily have not abandoned office, but the cases they will write have narrowed sharply, and the pricing gap between a clean modern building and a tired secondary one has widened from 50 to 150 basis points in eighteen months.
We arrange office commercial mortgages across the United Kingdom and we see the same questions from clients in 2026 as we did in 2024, but the answers have changed. Owner occupiers want to know whether they can still borrow at 70%. Investors want to know which lenders are pricing investment office at sensible rates. Refinance clients want to know whether their existing lender is going to renew or push them to find a new home. The honest answer in each case depends on the building, the tenant, and the EPC.
This page sets out where the pricing actually sits this month, how the underwriting reads in practice, and a worked example we have closed recently for a regional Grade A owner occupier office.
The two office sub markets, and why they price differently
Office is not one sector. From a commercial mortgage underwriting view it is at least two markets, and the price gap between them is now significant.
Modern fitted office, broadly post 2010 build or comprehensively refurbished, with an EPC B or C and reasonable energy data, is the tighter of the two. Owner occupier purchases on this stock are still printing at the lower end of our rate range, 6.95% to 7.50% for a five year fixed at 60% to 65% LTV with a strong trading covenant. Investment cases on modern offices with a recognisable tenant on a four year plus WAULT print 7.25% to 8.00% for the same band.
Traditional period office, Georgian terrace conversions, Victorian warehouse conversions, mid century blocks with no recent refurbishment, is the harder market. Some lenders will not touch it at all. Those that will write business charge 7.75% to 8.95% and cap LTV at 60% in most cases. The energy performance certificate is doing most of the work here. A pre war building with single glazing and a gas boiler scoring EPC E is, from April 2027, almost unleaseable without a costed upgrade plan, and underwriters are pricing that future risk now.
What lenders actually want to see on an office file
The information request from underwriters on office cases in 2026 has expanded beyond what most brokers would have asked for two years ago. In addition to the standard property details, expect the lender to want:
- Full EPC certificate, with a costed upgrade plan if the rating is below C.
- For investment cases, the full sitting tenant covenant pack, three years filed accounts where available, and a credit reference agency rating.
- A WAULT calculation to both expiry and break, with a view on re letting risk.
- A statement of recent service charge accounts and an Estates Surveyor view on dilapidations exposure.
- For owner occupier cases, two to three years filed accounts of the trading entity, current management accounts, and a serviceability case that stands on trading cashflow alone before any rental income from sub let space.
Some of this used to be optional. None of it is optional now.
Refinance office cases need to be started early
If the current facility is expiring in the next twelve months and the building sits below EPC C, we recommend starting the refinance conversation now rather than waiting for the maturity date. The market has changed enough that a renewal which would have been almost automatic in 2023 may need to go to a different lender in 2026, and that lender will want a full underwriting pass. Building in twelve weeks rather than four weeks gives time to get the EPC upgrade plan in place, the dilapidations addressed where needed, and the file in front of the right lender first.
Where the building is sound and the covenant is strong, office is still a perfectly bankable sector. It is just no longer a default approval.
Underwriting nuances unique to this sector
EPC rating is now a hard underwriting line
From April 2027 it becomes unlawful to lease a commercial property with an EPC below E, and several lenders are already underwriting to a C minimum on five year facilities. If the building sits at D or E and there is no costed upgrade plan, expect a haircut on LTV of 5 to 10 percentage points or a held back retention until works complete.
Covenant strength of the sitting tenant
Office underwriting now reads more like a credit committee paper than a property file. Underwriters want the tenant Dun and Bradstreet rating, last three years filed accounts where the tenant is private, and a view on sector risk. A serviced office operator on a long lease is a different covenant from a FTSE 250 anchor, even at the same headline rent.
Weighted average unexpired lease term, WAULT
Most office investment lenders want WAULT to certain break of three years minimum for a five year facility and four years for a longer term. Where WAULT is short, expect interest only periods to be reduced, debt service cover ratio thresholds raised from 130 to 150, and sometimes a cash reserve held against re letting risk.
Owner occupier office is a different conversation
An owner occupier business buying its own office gets underwritten on trading covenant first, property second. Two years of clean filed accounts, a serviceability ratio that works on the business cashflow alone, and a sensible deposit. We have placed owner occupier offices at 70% LTV with regional building societies where the same building as an investment would have capped at 60%.
Worked example
Regional Grade A office, owner occupier, £1.4m
- Property type Owner occupier office, Grade A regional
- Purchase price £1,400,000
- Loan amount £980,000
- LTV 70%
- Term 20 years
- Rate 5 year fixed at 7.15%
- Repayment basis Capital and interest, 20 year amortisation
- Monthly payment circa £7,690
- Annual debt service circa £92,300
- Coverage on trading profit 3.68 times
On these numbers the deal is comfortable for any of the building society lenders we use for owner occupier office. The same property bought as an investment with a five year lease to a single SME would price 50 bps wider and cap at 60% LTV.
Lender appetite snapshot
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Allica Bank
Active on owner occupier office to 70% LTV where trading covenant is strong, prefers EPC C or better, decisioning inside three weeks.
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Aldermore
Selective on investment office, wants prime stock and a named tenant, comfortable on regional cities.
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Shawbrook
Will look at refurb to let office on a short term facility, then refinance once stabilised.
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Specialist regional building societies
Cambridge Building Society, Cumberland and Mansfield all do owner occupier office at sharper rates than the high street, smaller loan sizes.
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Challenger banks for investment
Hampshire Trust and Cynergy Bank are open on investment office where covenant is grade A, less keen on multi let secondary stock.
Common deal breakers in this sector
- EPC E or below with no costed upgrade plan, several lenders now decline at file open
- Single tenant on a short lease where the property is hard to re let
- Traditional period office in a secondary location with no parking
- Owner occupier with less than two years filed accounts in current trading entity
- Co working or serviced office operator covenants where the underlying business is loss making