The £33 Billion Question: What Property Owners Need to Know About Refinancing in 2026

New lending for UK commercial real estate reached £52.7 billion in 2025, its highest level in a decade. The research, published by Bayes Business School, generated broadly positive headlines, and with good reason. A 29% year-on-year increase in new lending is a meaningful signal of returning confidence in the market after a difficult few years.

But for many property owners and developers, the more pressing story is not what happened in 2025. It is what is coming in 2026. Buried within that record lending figure is a detail that deserves far more attention than it has received. An estimated 19% of total outstanding real estate loans, representing somewhere in the region of £33 billion, are set to mature this year. For the owners and developers carrying that debt, the question is not whether to act but how quickly.

Why this year feels different

Refinancing is not a new challenge for commercial property, but the conditions surrounding it in 2026 are notably more complex than they were when many of those loans were first written. The majority were structured during a period of historically low interest rates, when lender appetite was broad and terms were relatively favourable. The environment today is different in almost every material respect.

Debt service costs are higher. Lenders are more selective. Valuations in some sectors have moved since the original loan was agreed, which affects loan-to-value ratios and the strength of the case a borrower can make for a new facility. And the macro environment has introduced fresh uncertainty at a particularly sensitive moment. The US-Iran conflict in February 2026 pushed two and five-year SONIA rates up by 30 basis points, adding to refinancing costs just as a significant volume of loans are approaching maturity. The collapse of bridging lender MFS around the same time has heightened scrutiny across parts of the lending market and introduced a degree of caution that was less visible at the start of the year.

None of this means the market is closed. Capital is available, and competition among lenders is genuine. But available capital and accessible capital are not the same thing, and the gap between them is largely determined by how well prepared a borrower is when they enter the process.

A market that looks very different from five years ago

One of the less-discussed consequences of the wider lending surge is the structural change it reflects in who is actually providing finance. UK banks, long the dominant force in commercial real estate lending, saw their market share fall from 40% to 36% in 2025 alone. Debt funds, by contrast, increased their share from 12% to 28% in a single year. Alternative lenders as a whole now account for 45% of outstanding commercial real estate loans, a proportion the Bayes research suggests will cross the 50% threshold within the next few years.

For a borrower whose original loan was written by a clearing bank and who plans to return to the same relationship to refinance, this shift has real practical consequences. Their lender may have reduced its appetite in their sector or geography. The terms a bank can offer may be less competitive than those available from a debt fund or other alternative lender. And engaging with a non-bank lender for the first time, particularly on a significant transaction, is a different experience that benefits from proper preparation and the right advice.

The Bayes research confirms that pricing did become more competitive during 2025, with margins on prime assets falling across lender types. That competition can work in a borrower’s favour. But lenders remain selective about what they will back. Development finance appetite is strongest in logistics, residential, and student housing. Retail and office assets attract considerably more caution, and borrowers in those sectors should expect a more rigorous process regardless of the apparent availability of capital.

The covenant question

One finding in the Bayes research that deserves particular attention is the estimate that between 15 and 20% of outstanding loans do not contain the covenant protections that would allow a lender to intervene before a formal default occurs. For borrowers, the absence of such covenants can feel like breathing room, but it also means there is less structure around what happens when a loan comes under pressure. When refinancing approaches and the numbers are tight, a borrower with no covenant framework may find themselves in a more exposed position than they realised, because lenders refinancing those loans will be looking hard at the underlying asset and the borrower’s covenant strength before committing new money.

Understanding what your existing loan documentation actually says, what protections it contains or does not contain, and what obligations it places on you as maturity approaches is essential groundwork before any refinancing conversation begins.

Preparation is where outcomes are determined

The default rate on commercial real estate loans fell from 6.3% at the mid-point of 2025 to 3.8% by the year end, which reflects genuine improvement. It remains above the long-term average of 3%, however, and the broader macro environment has introduced fresh uncertainty. The US-Iran conflict in February 2026 pushed two and five-year SONIA rates up by 30 basis points, adding to borrowing costs at a moment when many borrowers are already navigating complex refinancing decisions.

The record lending figures for 2025 are a genuine sign of market confidence, and for those approaching refinancing decisions this year, that confidence is a helpful backdrop. But healthy markets still reward preparation, and for property owners with loans maturing in 2026, the time to begin that process is not when the lender makes contact but well before it.

What good preparation looks like

Approaching refinancing well means reviewing your existing loan terms and documentation thoroughly before any lender conversation begins. It means understanding your current loan-to-value position and how that sits against current market valuations, which in some sectors have moved since the original loan was written. It means having a clear view of your covenant position and what obligations fall on you during any period of negotiation. And it means taking legal advice early, so that the terms of any new facility are scrutinised properly before you are committed to them.

The borrowers who secure the best refinancing terms in 2026 will not be those who wait for their lender to make contact as maturity approaches. They will be those who begin the process early, with a clear picture of their current position and a thorough understanding of their existing loan documentation. Property owners who treat this year’s refinancing decisions with the seriousness they deserve will be significantly better placed than those who approach them reactively.

If you are facing a refinancing decision this year and would like to understand your position and your options, our team is here to help.