How Lenders View Retail Property
Retail is an asset class that lenders have become more selective about since the growth of online shopping and changes to high street occupier patterns. However, the picture is nuanced. Well-located retail in strong catchment areas - particularly food and beverage, services and convenience retail - continues to attract competitive lending. Secondary retail and units in struggling town centres face tighter criteria and higher rates.
Key factors lenders examine for retail mortgages:
- Location (prime vs secondary high street, retail park, out-of-town)
- Tenant quality (national chain vs independent vs vacant)
- Unexpired lease term (minimum 5 years strongly preferred)
- Passing rent vs estimated rental value (ERV)
- Footfall trends and vacancy rates in the area
- Property condition, EPC rating and configuration
Retail Mortgage Rates and LTV
| Scenario | LTV | Rate (p.a.) | Lender Type |
|---|---|---|---|
| Prime retail, strong tenant, long lease | Up to 65% | 5.5–6.5% | High street / challenger |
| Owner-occupier retail business | Up to 65% | 5.5–7.0% | High street / challenger |
| Mixed-use (retail + residential) | Up to 70% | 5.0–6.5% | Semi-commercial lenders |
| Secondary retail, shorter lease | Up to 55% | 6.5–8.5% | Specialist lenders |
| Vacant retail unit | Up to 50% | 7.0–10.0% | Bridging / specialist |
Mixed-Use (Retail with Residential Above)
Properties with retail on the ground floor and flats above are classified as semi-commercial or mixed-use. This structure is actually attractive to some lenders as the residential income diversifies the income stream and provides downside protection. Some lenders use a blended approach - assessing both income streams against a combined rate - while others split the facility into two products.
Vacant Retail: What Are Your Options?
Vacant retail is difficult to mortgage on long-term terms. However, a bridging loan can provide short-term finance while you secure a tenant, carry out refurbishment or manage a planning application. Once the property is tenanted and income is evidenced, we can refinance onto a long-term commercial mortgage. We frequently structure two-stage solutions for investors acquiring vacant retail at a discount.