Commercial Investor refinancing: The Silent Growth Engine
In commercial investment, the most obvious growth story is the new acquisition. The one nobody talks about enough is the refinance that made it possible.
A well-timed refinance of a performing commercial asset can be one of the most efficient ways to fund the next purchase without having to rely solely on fresh equity. That matters more in the current market because UK commercial property is no longer being driven by the easy yield compression story of the ultra-low-rate years. The recovery is now far more income-led. Savills expects UK commercial property to deliver average annual total returns of 9.4% over the next five years, broadly in line with the long-run MSCI average, while CBRE is forecasting around 8.5% net total returns for 2026, with performance supported by income and gradual capital value growth rather than dramatic repricing.
That is exactly why refinancing deserves more attention. If an asset has performed, whether through rental growth, active asset management, lease events or simple market recovery, the refinance can crystallise some of that progress into usable capital. You are not selling the property. You are keeping control of the asset, retaining the income, and pulling out equity to help fund the next deal. In practical terms, that can create a compounding effect: buy well, improve income, refinance, recycle capital, repeat. That is the commercial property flywheel. The reasoning is stronger in 2025/26 because both Savills and CBRE are pointing to a market where income remains a major driver of returns and debt is becoming more workable again as lending conditions improve.
The data backs up that shift. CBRE states that loan originations for real estate investment and development rose in 2025 and expects originations to rise again in 2026 as market conditions improve. Importantly, it notes that most lending in 2025 was focused on refinancing of investments, with a more even balance between acquisitions and refinancing expected in 2026. That is a meaningful point. It shows refinancing is not a side issue in this market. It has been one of the main uses of real estate debt. CBRE also expects real estate debt costs to decrease further, helped by its interest-rate outlook and greater competition among lenders, making debt accretive for a wider range of investments.
There is also a wider lending backdrop worth paying attention to. UK Finance reported that gross lending to SMEs by the main high street banks rose 13% year on year to just over £16 billion in 2024, with notable increases in new lending to the real estate sector. At the same time, 60% of SME lending now comes from outside the main high street banks. That matters because commercial borrowers are increasingly operating in a broader funding market, where challenger banks, specialists and non-bank lenders are all playing a bigger role. For investors refinancing commercial assets, that wider lender base can translate into more structuring options, especially where the property is performing but does not fit a narrow vanilla bank model.
The logic for refinancing gets even stronger when you look at transaction activity. Savills reported that UK commercial investment volumes reached £54 billion in 2025, up 4% on the previous year, with Q4 2025 alone hitting £20 billion, the highest fourth quarter since 2021 and 18% above the ten-year average for Q4. Savills also expects turnover in 2026 to be 10% above 2025 levels. In plain English, liquidity is improving. That does not mean every asset has suddenly rerated, but it does mean there is a more active market in which stronger assets can support more confident valuations and refinancing discussions. For owners of stabilised stock, that creates a genuine opportunity to review whether trapped equity can be redeployed more productively.
This is where the flywheel effect becomes commercially interesting. Imagine an investor bought a commercial asset a few years ago on a sensible day-one yield, improved the tenancy profile, and benefited from rental growth. If the income has strengthened and the value has moved accordingly, the investor may now be sitting on dormant equity. Leaving that equity untouched may feel conservative, but it can also be inefficient. A refinance can release part of that capital while the original property continues producing rent. If that released capital becomes the deposit or equity contribution for the next acquisition, the first asset is effectively helping to fund the second. Then the same process can repeat again later, provided leverage remains sensible and the assets genuinely perform. That is not aggressive for the sake of it. It is disciplined capital recycling.
The reason this argument is more justifiable now than it was 18 months ago is that the market data looks more constructive. Savills says overall five-year return forecasts for UK property have improved from 7.4% per annum to 7.8% per annum, with income playing a bigger role in delivering those returns. CBRE, similarly, expects 2026 capital value growth to be gradual and rental-led. That combination matters. When income growth is doing more of the heavy lifting, a performing commercial asset is not just a static holding. It is a potentially refinanceable engine of future equity.
That said, the case for refinancing is not “borrow more because you can”. It only works if the numbers remain sensible after debt costs, interest cover, covenant strength and exit planning are all stress-tested. The Bank of England has been clear that refinancing challenges remain in commercial real estate, partly because some collateral values are still below earlier peaks. In its November 2024 Financial Stability Report, it said UK CRE prices had fallen more than 20% from their 2022 peaks, though they had stabilised in recent quarters, and it highlighted that refinancing remains challenging for some CRE borrowers. That is an important caution. The flywheel only works on performing, bankable assets with a credible debt structure. It does not work on hope.
So the real question is not whether refinancing is available. It is whether refinancing improves your position. If the asset is producing strong income, the leverage remains comfortable, and the released capital can be deployed into a second acquisition with a clear rationale, then refinancing can become a quiet but very powerful growth tool. In that sense, it is often not the next purchase that changes the trajectory of a portfolio. It is the refinance before it.
That is why, in commercial property, refinancing is often the silent growth engine. Done well, it turns one good asset into momentum for the next one.
Sources
Savills, Market in Minutes: UK Commercial – January 2026 for 2025 investment volumes, Q4 volumes, and five-year return forecast.
CBRE, UK Capital Markets Outlook 2026 for 2026 capital value outlook, net total return forecast, falling debt-cost view, and the increase in loan originations with refinancing as a major use of debt in 2025.
Savills, UK Cross Sector Outlook 2026: Comparative returns for the revised five-year return forecast and the increased importance of income in total returns.
UK Finance, Gross lending to SMEs up in 2024 for SME lending growth, real estate sector lending, and the share of lending coming from outside the main high street banks. Bank of England, Financial Stability Report, November 2024 for CRE refinancing challenges and the statement that UK CRE prices had fallen more than 20% from 2022 peaks before stabilising.
