After a period of uncertainty and volatility in the real estate finance market in recent years, 2026 brings hopes of building on 2025’s steady recovery, but the landscape is still changing.
Refinancing
As in 2025, refinancing is still a watchpoint for 2026. It is anticipated that there are more than £30bn of UK commercial real estate loans due for refinancing in 2026 but, as in 2025, these loans are coming into maturity in a new landscape from the one in which the loans originated; debt costs have increased and lenders are more specific and stringent about what they can take to credit. Borrowers will need to build in time to get new arrangements in place before their loans mature.
Acquisition finance
There’s also a sense of market optimism around an increase in acquisition financing, although this is likely to require an increase in acquisition deal flow generally, and possibly a cut in interest rates, to pick up momentum.
Changes in lender focus
While lenders are seeing opportunities in 2026 across the board, particularly in living sectors, logistics and development finance, lenders are increasingly taking a more granular approach to selecting assets, with greater scrutiny over specific asset strategies. Borrowers with clear value-add plans and transitional programmes (particularly in areas of increased public focus, like ESG) are likely to attract more lender interest than the traditional income-driven management plan – in the age of profile-raising social media posts, does this mark a shift towards lenders seeing opportunities to be part of an asset’s success story?
Blocks to success
Innovation and understanding by lenders is going to be key to agreeing attractive term sheets, but those concepts also need to trickle down to the parties’ advisors. Loan documentation negotiation needs to become more flexible to give space to borrowers to carry out their initial business plans (ie, the plan that was already scrutinised by the lender at the outset…) during the loan term without having to constantly approach their lender for further consents.
On a wider note, uncertainty and volatility create market hesitation, both on a world stage but also in legislation. For example, while the living sector remains a popular choice for lending, the behemoth that is the Building Safety Act continues to have an impact on residential developments both existing and new, and lenders are rightly cautious about approaching assets which may have become problematic under this legislation. We have seen assets be removed from proposed portfolio security for not being sufficiently compliant, and other assets accepted only due to a strong ongoing lender-borrower relationship. Coupled with lingering uncertainties in construction costs, development finance as a whole remains both appealing and challenging for new projects.
Relationship borrowing
The overarching element linking all of the above, is that in 2026 building trusted lender-borrower relationships will be increasingly important on both sides. It benefits borrowers with development plans and transition strategies to draw their finance from lenders who understand them and their asset portfolios, and lenders who have happy repeat customers will attract other borrowers and build their lending portfolio accordingly.
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