Commercial development can be one of the most lucrative areas of property finance. Office conversions, mixed-use schemes, and retail redevelopments often deliver high yields and transformational returns. But they also carry some of the greatest risks — particularly at the exit stage.
In residential schemes, exits typically follow a well-trodden path: units are sold individually, or portfolios refinance onto buy-to-let mortgages. In commercial development, the options are more varied and often more uncertain. Borrowers may look to refinance into an investment facility, sell the entire asset, or reposition the scheme in response to shifting market demand.
For lenders, this makes exit planning critical. A strong scheme with a weak exit plan is still a high-risk facility. As we discussed in Why Exit Risk Keeps Lenders Awake at Night, lenders’ greatest fear is not build quality or GDV but repayment. For developers and introducers, understanding exactly what lenders look for in commercial exits is the key to unlocking funding — and ensuring projects do not end in costly defaults.
The commercial property market in 2025 is in flux. Office demand remains uncertain in a hybrid-working economy. Retail continues to evolve under e-commerce pressure. Even logistics, one of the strongest asset classes of recent years, is beginning to normalise.
Against this backdrop, lenders scrutinise commercial exits more closely than ever. Residential comparables are relatively predictable; commercial values depend heavily on tenant demand, lease structures, and broader market cycles. That means lenders do not simply ask whether a building is completed — they ask whether it is income-producing, who the tenants are, and what yield profile will support refinance.
As explored in Navigating Valuation Gaps, overestimating values can sink repayment plans. In commercial schemes, that danger is magnified.
1. Evidence of Tenant Demand
The strongest commercial exit is one supported by pre-lets or long-term tenant agreements. A vacant building, no matter how well-built, is far harder to refinance. Lenders want evidence that rental income will flow immediately, supporting debt service from day one.
For developers, this means engaging with agents and tenants early, not waiting until practical completion. For introducers, it means advising clients that tenant demand is as important as build quality in securing exit finance.
2. Realistic Yield Assumptions
Commercial values are tied to yields. A developer projecting a 4% yield in a market trading at 6% is presenting an unrealistic exit. Lenders will discount the GDV accordingly, reducing leverage and increasing equity requirements.
Successful borrowers provide evidence — comparable yields, tenant covenants, and market reports — to justify their assumptions. Lenders expect to see this analysis in detail, not in broad strokes.
3. Viable Refinance Options
While some commercial schemes are sold on completion, many exit via refinance. Lenders will therefore ask: which institutions are likely to provide long-term investment facilities, and on what terms? If the scheme does not fit mainstream appetite, borrowers must identify private banks or debt funds willing to step in.
As noted in Exit Finance for HNW Borrowers: Why Private Banks Matter, private banks often play a key role where mainstream lenders cannot. For commercial developers, aligning with such institutions early can be decisive.
Consider a borrower developing a mid-sized office-to-residential conversion. The build completes successfully, but demand for office tenants is weak. The borrower’s original plan — refinance into a commercial investment loan — collapses. Without pre-lets or proven rental demand, lenders discount value heavily, and the scheme struggles to exit.
Had the borrower built residential fallback options into the plan, or engaged lenders earlier about alternative exits, the outcome could have been preserved. Instead, a strong development ends in distress.
This illustrates why lenders demand robust exit planning. A good scheme without a viable exit is no longer good enough.
For wealth managers, accountants, and lawyers advising commercial developers, exit planning is not peripheral — it is central to client outcomes. Advisers who focus only on construction finance without addressing exits risk exposing clients to default.
By contrast, introducers who bring in specialist brokers early can add significant value. Brokers stress-test exit assumptions, align them with lender appetite, and design fallback strategies. For introducers, this not only protects client wealth but also enhances professional credibility.
In How Lenders Can Reduce Default Risk Through Broker Partnerships, we explained how brokers serve as lenders’ first line of defence. For commercial developers, they are also the introducer’s best safeguard.
In 2025, lenders’ scrutiny of commercial exits is sharper than ever:
For developers, this means lenders are quicker to reject deals with weak exits. For introducers, it means that structuring advice is not optional — it is essential.
At Willow Private Finance, we specialise in designing exits for complex schemes, including commercial developments. That means:
For developers, this translates into confidence: projects are not just buildable, but bankable. For introducers, it means a trusted partner who safeguards both client wealth and professional reputation.
Frequently Asked Questions
What makes commercial development exits more complex than residential ones?
Because commercial value depends heavily on tenant demand, lease structures, yield assumptions and market cycles — a building is not only expected to be built, but income-producing.
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Why is evidence of tenant demand critical for lenders?
Because a vacant commercial asset is much harder to refinance — lenders favour schemes with pre-lets or long leases in place from day one.
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How do lenders assess yield assumptions in commercial exits?
They expect realistic, market-based yield projections supported by comparables and tenant covenant strength. Overly optimistic yield assumptions trigger discounts or increased equity requirements.
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What role do refinance options play in the exit plan?
Lenders want clear pathways to long-term investment facilities — if the project doesn’t align with mainstream lenders, the borrower should identify private banks or debt funds as alternatives.
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How should developers guard against exit failures in mixed-use or repurposed schemes?
By embedding fallback options (e.g. residential conversion, alternative tenancy models) and presenting stress-tested exit strategies rather than relying on one single path.
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How has the 2025 market environment tightened lender scrutiny?
Because of volatility in office, retail and logistics sectors, lenders are quicker to demand stronger exit proof, discount assumptions more aggressively, and avoid deals with weak exit plans.
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About the Author — Wesley Ranger
Wesley Ranger is the Founder and Director of Willow Private Finance. With over 20 years of experience structuring complex exits, he has worked on commercial developments ranging from office conversions to mixed-use schemes. Wesley specialises in aligning borrower strategies with lender expectations, protecting both clients and introducers from the risks of failed exits.
Important Notice
This article is for information purposes only and does not constitute financial advice. Property finance carries risk, including the risk of default or repossession if loans are not repaid. Exit strategies should be assessed carefully and tailored to individual circumstances. Always seek professional advice before entering into any finance agreement. Willow Private Finance is directly authorised and regulated by the Financial Conduct Authority (FRN: 588422).
