By 2026, a growing number of UK commercial property owners are confronting what is increasingly described as the commercial refinance wall. Loans originated between 2018 and 2021, often at aggressive loan-to-value ratios and under materially different interest rate assumptions, are now reaching maturity in a market where capital values have adjusted downward and lender risk tolerance has tightened.

The challenge is not always asset performance. In many cases, properties remain cash-flow positive, tenanted, and operationally sound. The problem lies in valuation resets. Yield expansion, ESG-related risk adjustments, and more conservative lender assumptions mean that refinancing at prior leverage levels is frequently no longer possible. Even modest valuation declines can create material shortfalls when loans mature.

This dynamic is unfolding alongside the Bank of England’s decision to hold the base rate in February 2026, reinforcing a “higher for longer” interest rate environment. Lenders are no longer underwriting on the expectation of imminent rate relief. Instead, they are prioritising downside protection and capital preservation.

At Willow Private Finance, we are seeing an increasing number of landlords who are not distressed in a traditional sense, but who nevertheless face refinancing pressure due to technical breaches of loan-to-value covenants or insufficient headroom under revised stress tests.

This article examines why the commercial refinance wall has emerged, how bridge-to-term strategies are being used in 2026, and what landlords need to understand to avoid forced asset sales.

Market Context In 2026

Commercial property markets entered 2026 with uneven recovery across sectors. While logistics and certain alternative assets have stabilised, offices, secondary retail, and mixed-use stock continue to face valuation pressure. According to UK Finance commentary released in late 2025, refinancing risk has become one of the most closely monitored issues within commercial lending portfolios.

The refinancing challenge is structural. Many existing loans were underwritten at sub-3% interest rates with optimistic exit assumptions. In 2026, refinancing must contend with higher debt service costs, lower capital values, and increased scrutiny around asset sustainability and tenant quality.

At the same time, lenders are managing their own balance sheet constraints. Regulatory capital requirements, ESG exposure limits, and internal concentration caps mean that even performing loans may not be refinanced on a like-for-like basis. This is particularly true for assets that fall outside prime locations or sectors.

The result is a growing cohort of borrowers who are solvent, cash-generative, and professionally managed, but still unable to meet refinance criteria without restructuring.

How Commercial Refinancing Works In Practice

In a normal refinancing environment, lenders assess commercial assets on three core metrics: value, income, and sponsor strength. In 2026, the weighting of these metrics has shifted.

Valuation now carries disproportionate influence. Even where income remains stable, a reduction in capital value can drive loan-to-value ratios beyond acceptable limits. Stress testing on income has also tightened, with lenders applying higher interest rate assumptions and more conservative void allowances.

Sponsor strength still matters, but it cannot fully offset asset-level constraints. Personal guarantees, additional security, or cross-collateralisation may improve outcomes, but they are not a universal solution.

Where a refinance gap emerges, typically the difference between outstanding debt and maximum senior debt available, borrowers must either inject capital, sell assets, or restructure.

What Lenders Are Looking For In 2026

Lenders refinancing commercial assets in 2026 are focused on path to stabilisation rather than perfection. They are asking whether the asset can be repositioned, re-tenanted, or de-risked over time.

Cash flow quality is critical. Long leases, credible tenants, and clear rent review mechanisms materially improve lender confidence. Conversely, assets with near-term lease events or tenant concentration issues face tighter scrutiny.

Sustainability risk is also embedded into credit decisions. Poor EPC ratings, uncertain capex requirements, or regulatory exposure can compound valuation pressure and reduce available leverage.

Crucially, lenders want to see proactive borrower behaviour. Early engagement, transparent disclosure, and realistic structuring are viewed far more favourably than last-minute refinancing attempts.

Common Challenges And Misconceptions

A common misconception is that bridge finance is only for distressed borrowers. In 2026, bridging is increasingly used as a strategic tool rather than a rescue measure.

Another challenge is assuming that strong income will override valuation issues. While income is essential, most lenders will not ignore loan-to-value breaches, particularly in a cautious credit environment.

Some borrowers also underestimate the time required to execute complex refinances. Valuation delays, legal complexity, and lender approval processes mean that waiting until loan maturity can materially weaken negotiating position.

Where Most Borrowers Inadvertently Go Wrong In 2026

Many commercial landlords approach refinancing as a binary exercise: either a standard refinance works, or the asset must be sold. This overlooks the range of interim capital solutions available.

By delaying engagement until maturity pressure is acute, borrowers often lose control of lender selection and structure. Credit narratives become reactive, and terms harden accordingly.

This is where Willow Private Finance adds the most value: intervening before another application is made and controlling how the case is presented to market.

Structuring Strategies That Improve Approval Odds

Bridge-to-term strategies are becoming central to navigating the refinance wall. These structures provide time—typically 12 to 36 months—to stabilise value, complete leasing, or execute capex before transitioning to long-term debt.

Successful structures are conservative by design. Lower leverage, clear exit strategies, and transparent reporting requirements improve lender confidence and pricing.

In some cases, layering capital—using senior bridge with subordinated support or sponsor equity—can preserve asset ownership while avoiding forced sales at depressed valuations.

The key is aligning structure with realistic timelines and credible execution plans.

Hypothetical Scenario: Bridge-To-Term In Practice

Consider a regional office building valued at £10 million in 2021, financed at 65% LTV. In 2026, the asset is revalued at £8 million despite stable income, leaving a refinance shortfall.

A bridge facility is arranged at lower leverage, providing time to secure longer leases and complete targeted improvements. After 24 months, the asset refinances into a term loan at improved valuation, avoiding a forced sale.

This scenario reflects the commercial reality of 2026: value recovery takes time, not denial.

Outlook For 2026 And Beyond

The commercial refinance wall will remain a defining feature of the market over the next several years. Loan maturities will continue to collide with revised valuation and risk assumptions.

Borrowers who engage early, structure flexibly, and prioritise optionality will be best placed to navigate this period without sacrificing long-term value.

Frequently Asked Questions

What is meant by the “commercial refinance wall” in 2026?
The commercial refinance wall refers to the growing volume of commercial property loans reaching maturity that cannot be refinanced on like-for-like terms due to valuation declines rather than income failure. Many of these loans were originated between 2018 and 2021 at higher leverage levels, under assumptions of lower interest rates and stronger capital values. In 2026, even well-performing assets can face refinancing gaps because revised valuations and tighter lender criteria no longer support the original debt quantum.

Why are stable, income-producing assets still struggling to refinance?
While income remains a critical underwriting factor, lenders in 2026 are placing greater emphasis on loan-to-value ratios and downside protection. Valuation resets driven by yield expansion, ESG considerations, and sector-specific risk mean that income alone is often insufficient to justify previous leverage levels. As a result, borrowers may find that strong cash flow does not fully offset reduced capital values in lender decision-making.

How have lender risk appetites changed for commercial refinances?
Lenders are now underwriting with a stronger focus on capital preservation rather than growth assumptions. This includes higher stress interest rates, more conservative income assumptions, and closer scrutiny of exit liquidity. Credit committees are increasingly cautious about refinancing assets where value recovery is uncertain, even if short-term performance appears stable.

What role does bridge finance play in addressing the refinance wall?
Bridge finance is increasingly used as a strategic tool rather than a last-resort solution. In the context of the refinance wall, bridge-to-term structures provide time to stabilise assets, complete leasing activity, execute capital expenditure, or wait for market conditions to normalise. These facilities allow borrowers to avoid forced sales while working toward a longer-term refinancing solution.

Are bridge-to-term strategies suitable for non-distressed assets?
Yes. Many bridge-to-term transactions in 2026 involve assets that are operationally sound but temporarily misaligned with lender criteria. The purpose is not to rescue failing properties, but to bridge a valuation or timing gap. When structured conservatively with clear exit strategies, these facilities are viewed positively by specialist lenders.

How long do bridge-to-term solutions typically run, and what do lenders expect?
Bridge-to-term facilities commonly range from 12 to 36 months, depending on the asset and the proposed stabilisation strategy. Lenders expect a clearly articulated exit plan, realistic assumptions around value recovery, and evidence that the borrower has both the experience and resources to execute the plan. Vague or speculative exits significantly weaken approval prospects.

Can borrowers avoid the refinance wall by injecting additional capital?
In some cases, partial capital injection can reduce leverage to acceptable levels and enable a conventional refinance. However, this is not always practical or desirable, particularly for large assets or portfolios. Bridge structures can sometimes preserve more long-term value by avoiding disproportionate equity injections at depressed valuations.

How important is early engagement with lenders or advisers?
Early engagement is critical. Borrowers who address refinancing challenges well ahead of maturity retain far greater control over structure, lender selection, and pricing. Leaving matters until loan maturity approaches often results in reduced options, tighter terms, and a reactive negotiating position.

What is the biggest mistake commercial landlords are making in 2026?
The most common mistake is assuming that refinancing will be available on similar terms simply because the asset is performing. This underestimates how materially lender assumptions have shifted since the original loan was written. Proactive planning, realistic leverage expectations, and flexible structuring are essential in the current environment.

How Willow Private Finance Can Help

Willow Private Finance works with commercial landlords and investors facing refinancing pressure in 2026. As an independent, whole-of-market intermediary, we structure bridge-to-term solutions that reflect lender reality rather than historic assumptions.

Our focus is on preserving control, managing lender sequencing, and aligning capital structures with realistic exit strategies in a changing market.

📞 Want Help Navigating A Commercial Refinance In 2026?

Book a free strategy call with one of our mortgage specialists.

We’ll help you assess refinance gaps and structure the right bridge-to-term solution.