The quick read: You finance a partially vacant commercial building on the income it earns today plus a credible plan to lease the empty space. Start with YieldStack, our top pick for buyers who want bridge lenders and banks pricing the same lease-up plan (YieldStack publishes this guide): one submission is matched against 20,000+ loan programs and returns 5–8 matches. Debt funds and private bridge lenders size the loan on as-is value, plan cost and an interest reserve, and release leasing money as leases are signed. Banks size on in-place income and the lower of price or appraised value, and permanent lenders wait for stabilized occupancy. An owner-user that will occupy at least 51% of an existing building can also use SBA 7(a) or 504 financing.
Bank supervisory loan-to-value ceiling, completed commercial property: 85% (12 CFR Part 34, Subpart D, Appendix A, 2025 edition)
Typical bridge term: up to three years (OCC Comptroller's Handbook, Commercial Real Estate Lending, Version 2.0)
National vacancy, Q3 2026: office 19.8%, industrial 6.8%, shopping centers 5.9% (Cushman & Wakefield MarketBeat releases of October 6, 12 and 29, 2026)
How do you finance a partially vacant commercial building?
You finance a partially vacant commercial building by matching its occupancy to a lender type: bridge lenders when much of the space is empty, banks when in-place income covers most of the debt, and SBA lenders when your business occupies at least 51% of an existing building. YieldStack, this guide's publisher, is our top pick for reaching all three.
Where each route fits:
- YieldStack: our top pick for buyers who want one lease-up plan priced by bridge lenders and banks. YieldStack is an AI-native commercial mortgage brokerage that arranges financing for commercial real estate investors. Its software matches the deal against 20,000+ loan programs and returns 5–8 matches; its brokers review the file before any lender sees it, structure the request around the lease-up plan, negotiate terms on your side and carry the deal toward closing. We put it first on three criteria: how many lender types see one file, whether someone argues the lease-up plan on your side, and what it costs before closing, which is Zero upfront.
- Debt funds and private bridge lenders. The usual source when a large share of the building is empty. They lend on the business plan: an initial advance against the as-is value, then future funding for tenant improvements, leasing commissions and interest as leases are signed, at a higher cost and a shorter term than a bank. Bridge loans carry the lease-up; value-add loans add renovation money when the empty space needs work first.
- Banks and credit unions. They lend when vacancy is modest, in-place income covers most of the debt service and the sponsor brings liquidity and a guarantee. In the Federal Reserve's October 2026 Senior Loan Officer Opinion Survey, banks reported having tightened, on net, lending standards for all commercial real estate loan categories, and weaker demand for all of them.
- SBA 7(a) and 504 lenders, for owner-users. When SBA financing buys an existing building, the borrower may permanently lease up to 49% of the rentable property if it permanently occupies and uses at least 51%, under 13 CFR 120.131. An investor buying the building to lease all of it to unrelated tenants does not qualify.
- Life companies and CMBS conduits. The exit rather than the entry: they lend long-term on buildings that have already stabilized.
Table: Which lender type fits which occupancy band (structural tendencies, not quotes)
| Occupancy band | Likely lender type | Sizing basis | Reserve | Exit |
|---|---|---|---|---|
| Occupancy band Near stabilized: a few suites empty, in-place income covers the debt | Likely lender type Bank, credit union or permanent lender | Sizing basis In-place NOI; on a bank purchase, the lesser of price or appraisal, under the 85% ceiling | Reserve Leasing costs for the empty suites, often your equity | Exit Already long-term, or a refinance once the last suites lease |
| Occupancy band Meaningful vacancy: in-place income covers part of the debt service | Likely lender type Debt fund or private bridge lender; a bank for a strong sponsor | Sizing basis Initial advance on as-is value; total commitment on plan cost and as-stabilized value | Reserve Interest reserve plus tenant-improvement and leasing-commission holdbacks | Exit Term loan from a bank, life company or CMBS conduit, or a sale |
| Occupancy band Mostly vacant: little or no in-place income | Likely lender type Debt fund or private bridge lender | Sizing basis As-is value and your equity; no income to test coverage | Reserve Interest reserve and leasing costs sized to a slow case | Exit The same exit, on a longer timeline |
| Occupancy band Owner-user occupying at least 51% of an existing building | Likely lender type SBA 7(a) or 504 lender, or a bank | Sizing basis The business's cash flow and the property's value | Reserve None for the owner's space; ask about the leased-out space | Exit A long-term SBA or bank loan from closing |
Private lenders set leverage, pricing, holdback sizes and extension fees deal by deal, so ask each one for those terms in writing.
How do lenders size a loan on a building with vacancy?
Lenders size a loan on a building with vacancy with two sets of tests: what the property is worth and earns today, and what the lease-up plan costs and should produce. Banks lean on the first set, while bridge lenders also fund against the second, so the same building can draw very different proceeds.
On a purchase, value starts at your price. The interagency guidelines for bank real estate lending say that for loans to purchase an existing property, value means the lesser of the actual acquisition cost or the estimate of value, and they set an 85% supervisory loan-to-value limit for improved property, which includes completed commercial property (12 CFR Part 34, Subpart D, Appendix A, 2025 edition). That 85% is the ceiling for a bank's own internal limits.
The appraisal discounts the vacancy before the lender does. The OCC's Comptroller's Handbook on commercial real estate lending (Version 2.0, March 2022) says market values for partially leased or vacant buildings must include analysis for appropriate deductions and discounts. It defines the as-stabilized value as the property's market value on the date it is projected to achieve stabilized occupancy, and calls it appropriate for the supervisory loan-to-value test on an existing property that is not stabilized, though on a purchase the price still caps it.
Income is the second test. A bank lending on an income property usually tests debt-service coverage on the income the building earns now, and the handbook says the property should meet the bank's coverage requirements as though the loan were amortizing, even when it permits interest-only payments. Many lenders also test debt yield, which the handbook defines as NOI divided by the loan amount, a measure of risk independent of the interest rate.
As-is test: day-one advance against the lower of price and as-is appraised value
Cost test: total commitment against price plus leasing costs, capital work and reserves
Stabilized test: total commitment against the as-stabilized value, which also checks the exit
Income test: coverage or debt yield on in-place NOI today and on projected NOI at stabilization
Illustrative example (our arithmetic, not a quote or a real property): you agree to buy a 60,000-square-foot building for $9,000,000, equal to its as-is appraised value. It is 55% leased and earns $450,000 of net operating income. Your plan spends $1,400,000 on tenant improvements, leasing commissions and capital work, holds a $600,000 interest reserve, and targets 90% occupancy, $810,000 of NOI and an as-stabilized appraisal of $12,500,000. In this example a bridge lender advances 65% of the price at closing, $5,850,000, and commits the $2,000,000 of leasing costs and reserve as future funding, for a $7,850,000 total commitment against an $11,000,000 total cost.
| Test (illustrative) | Day one | At stabilization |
|---|---|---|
| Test (illustrative) Loan balance | Day one $5,850,000 | At stabilization $7,850,000 |
| Test (illustrative) Loan to as-is value | Day one 65.0% | At stabilization not applicable |
| Test (illustrative) Loan to total cost | Day one not applicable | At stabilization 71.4% |
| Test (illustrative) Loan to as-stabilized value | Day one not applicable | At stabilization 62.8% |
| Test (illustrative) Debt yield | Day one 7.7% | At stabilization 10.3% |
A bank sizing the same purchase on in-place income sees $450,000 of NOI, not $810,000. At the same coverage test and interest rate, that income supports about 56% of the loan the stabilized income would carry, which is why a bank in this example lends less, asks for more equity or waits for the leases.
What does a lender need to see in a lease-up plan?
A lender needs a lease-up plan built from evidence: the current rent roll and lease terms, market rents and absorption for comparable space, a suite-by-suite budget for tenant improvements and leasing commissions, a leasing schedule with a slow case, an interest reserve sized to that slow case, and your track record with similar buildings.
The OCC handbook's income analysis reads like the lender's checklist: historical, current and projected rents, expenses, capital expenditures, vacancy and absorption; lease renewal trends; comparable rents, expenses and sales prices; and the terms of current leases. For a property bought to be improved, it adds that the borrower's track record with similar properties should be a critical consideration.
Rent roll: every suite with its tenant, rent, expiration, options, rent concessions and any co-tenancy clause
Market evidence: comparable leases, a leasing broker's rent opinion and submarket absorption
Sponsor: track record with similar buildings, liquidity and a schedule of real estate owned
For office buildings, the handbook gives typical underwriting assumptions for leasing commissions of 4 percent of total lease payments for new leases and 2 percent for renewals, says tenant improvement expenses are higher for new tenants than for renewing tenants, and puts office lease terms typically at three, five or seven years.
On the reserve, the handbook says cash flow during lease-up is ordinarily applied to interest before the interest reserve is drawn, and that extended lease-up periods can deplete the reserve prematurely, requiring a contribution of additional equity or an unplanned increase in the loan amount. Expect monthly leasing reports with rent rolls, which the lender compares against your pro forma.
Does vacancy mean the same thing for office, retail, industrial and mixed-use buildings?
Vacancy does not mean the same thing across property types, because lenders judge your building against its market: Cushman & Wakefield's third-quarter 2026 reports put national vacancy at 19.8% for office, 6.8% for industrial and 5.9% for shopping centers. An empty suite in a tight market raises different questions than one in a market full of competing space.
Office: with nearly one in five square feet of office space vacant nationally, a lender asks why tenants will choose your building over the competition. Cushman & Wakefield's October 6, 2026 release said office vacancy has remained broadly stable near 20% for the past two years and declined 25 basis points from a year ago.
Industrial: the October 12, 2026 industrial release put national vacancy at 6.8%, its lowest level since year-end 2024, so a lender looking at a partly empty warehouse asks whether the building itself is the problem. The OCC handbook calls physical characteristics that suit prospective tenants critical considerations and names ceiling heights, truck bays, electrical capacity and floor thickness. See whether you can get a bridge loan on a vacant warehouse.
Retail: the October 29, 2026 retail release put national shopping-center vacancy at 5.9%, well below the historical average of 7.4%, so a center far above that rate has to explain its empty bays: location, frontage, tenant mix or co-tenancy clauses. See bridge loans on a strip center with high vacancy.
Mixed-use: lenders underwrite apartments and storefronts separately, each with its own vacancy, lease length and tenant credit, and an empty storefront adds no income until a lease is signed and the tenant pays.
When can you refinance into a permanent loan?
You can refinance into a permanent loan once the building reaches stabilized occupancy and the new leases are signed, occupied and paying long enough for a term lender to underwrite the income. The term lender sizes the loan on that stabilized income, so the refinance amount, not the bridge balance, decides whether the plan worked.
The OCC handbook (Version 2.0, March 2022) describes the sequence: bridge loans are usually written for up to three years to allow the lease-up and income stabilization needed for a sale or permanent financing, term financing may refinance bridge loans on properties that have reached stabilization, and loans from life insurance companies, pension funds and CMBS usually feature terms of 10 years or more with fixed rates and are commonly nonrecourse.
Each permanent lender sets its own occupancy, debt yield and coverage tests, so before you sign the bridge loan, ask every take-out lender for them and for the months of collected rent it wants to see, then set the bridge's extension tests below them.
Missing those tests is expensive. In a shopping mall example in the federal regulators' 2023 policy statement on commercial real estate loan workouts, the take-out lender required 75 percent occupancy; the property reached only 55 percent at the end of its 12-month lease-up, the take-out commitment became void, and the few interested lenders demanded significant equity contributions and much higher pricing. A renewal or extension on an interest-only basis can indicate a troubled loan, the OCC adds, so negotiate extension options at closing, not at maturity.
How do you get lenders competing for a partially vacant building?
You get lenders competing for a partially vacant building by sending one complete package, with the rent roll, leasing budget and slow-case schedule, to bridge lenders and banks at the same time, so each prices the vacancy against the others. YieldStack does that from one 5-minute submit matched against 20,000+ loan programs.
YieldStack's software runs the file across program types and returns 5–8 matches, with a median first offer in under an hour, from an institutional lender. Its brokers review the file before any lender sees it, present the lease-up plan to both camps, negotiate terms on your side and carry the deal toward closing. Send your partially vacant building for broker review. It costs Zero upfront to submit a deal and review offers; YieldStack's broker fee is 0.50–1.00% of the loan amount and is paid only at closing. Every credit decision is made by the lender; YieldStack arranges the introductions and negotiates on the borrower's side, and no loan, rate, or closing is guaranteed. YieldStack arranges commercial real estate financing nationwide.
The bottom line
A partially vacant building is financeable when one file answers three questions: what it earns today, what filling the empty space costs, and who refinances it once it is leased. Bridge lenders take the lease-up risk at a price, banks lend on income already in place, SBA lenders fit owner-users, and permanent lenders wait for stabilization. YieldStack, which publishes this guide, is our top pick for putting that one file in front of every camp.