Boston's office market is navigating one of the most significant transformations in its history. The headline numbers tell a complex story: overall vacancy has climbed to 18.2% to 23.9%, roughly 10 percentage points above the city's historical average. Yet beneath the surface, the market is bifurcating sharply. Trophy and Class A buildings in Back Bay and the Financial District have surpassed pre-pandemic rent levels, while Class B and C properties face 15% or greater rent declines and growing conversion pressure. For investors and owner-occupants, this duality creates both exceptional opportunities and significant risks that demand a sophisticated approach to financing.
This guide covers everything you need to know about financing office properties in Boston, from conventional loans for stabilized Class A buildings to bridge and conversion financing for repositioning plays.
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What Is the Current State of Boston's Office Market?
Boston's office market showed clear signs of stabilization heading into 2026, with leasing activity reaching 7.6 million square feet for the year, the highest annual total since 2019 and continuing a three-year upward trend. However, the recovery is uneven and concentrated in the highest-quality spaces.
Class A buildings dominated leasing activity in 2025, pulling in over 2.9 million square feet of deals downtown. Trophy assets added another 1.2 million square feet. Together, these top-tier properties accounted for the vast majority of new leasing, while Class B and C buildings continued to struggle with minimal new tenant demand.
The vacancy picture varies dramatically by building class and submarket. Overall vacancy stabilized at 18.2% in Q4 2025, ticking up only 10 basis points quarter-over-quarter after a period of more significant increases. JLL reported that full-floor tenant searches increased 77% compared to the prior quarter, signaling renewed leasing momentum. However, the broader availability rate, which includes sublease space and future availabilities, sits near 23.9%.
Asking rents tell the story of bifurcation most clearly. Finance-heavy submarkets like Back Bay and the Central Business District have seen trophy rents surpass pre-pandemic levels, with Class A space commanding $75 or more per square foot in Back Bay and $62 per square foot in the Financial District. Meanwhile, Class B asking rents across Boston are off by at least 15% from their peak, creating a two-speed market where the best buildings thrive and the rest face existential questions about their future use.
What Types of Office Loans Are Available in Boston?
The financing landscape for Boston office properties mirrors the market's bifurcation. Well-leased, Class A properties attract competitive permanent financing, while transitional and lower-quality buildings require creative capital solutions.
Conventional commercial mortgages for stabilized Class A and trophy office buildings offer the most competitive terms, with rates starting at 5.18% for the best-positioned assets. Lenders evaluate these properties based on tenant credit quality, weighted average lease term, building location, and competitive positioning within the submarket. Loan-to-value ratios typically range from 60% to 70%, reflecting lenders' increased caution toward office properties in the post-pandemic environment. Visit our permanent loan programs for more details.
SBA 504 loans remain one of the most powerful tools for owner-occupants purchasing office space in Boston. The program provides up to 90% financing with below-market fixed rates on the SBA portion. For a professional services firm, medical practice, or technology company purchasing its own office space, the SBA 504 program can dramatically reduce the capital required to own rather than lease.
Bridge loans serve the growing universe of office properties that need repositioning, lease-up, or conversion before qualifying for permanent financing. Rates range from 7.50% to 10.50% with terms of 12 to 36 months. In Boston's current market, bridge financing is essential for acquiring properties at discounted values and executing value-add or conversion strategies. Use our commercial bridge loan calculator to model a bridge-to-permanent strategy.
Conversion financing is emerging as a distinct category in Boston, driven by the city's office-to-residential conversion program. These loans, structured as bridge or construction loans at 8% to 11% with 24 to 36 month terms, fund the acquisition and conversion of office buildings into residential use. The exit strategy is permanent multifamily financing once the converted property achieves stabilized occupancy.
DSCR loans for office investment properties qualify based on the building's net operating income rather than the borrower's personal income. Rates range from 6.25% to 8.50% with LTV of 60% to 75%. These programs work best for well-leased office properties where the income stream is strong and predictable.
Which Boston Office Submarkets Offer the Best Investment Opportunities?
Each Boston office submarket presents a distinct risk-return profile that directly affects financing options and terms.
Back Bay commands the highest office rents in Boston proper, with Class A space exceeding $75 per square foot. The submarket benefits from its prestigious address, walkability, and proximity to upscale retail and dining. Vacancy of 12% to 15% is the lowest among major Boston office submarkets, and trophy rents have surpassed pre-pandemic levels. Lenders are most comfortable financing Back Bay office properties, offering the best rates and highest leverage for well-leased buildings in this submarket.
The Financial District is the largest office submarket in Boston and the most complex for investors to navigate. Vacancy ranges from 18% to 22%, and the submarket has seen dramatic repricing, exemplified by the 99 High Street sale at $100 million below assessed value. However, the Financial District's concentration of financial services, legal, and professional services tenants continues to generate significant leasing activity. Properties with strong tenancy are financeable at competitive rates, while vacant or under-leased buildings may require bridge financing for repositioning or conversion.
The Seaport has evolved into one of Boston's premier office districts, with asking rents of $65 to $70 per square foot. Major projects including 10 World Trade Center and the ongoing WS Development master plan have added significant modern supply. Vacancy of 15% to 20% reflects this new supply absorption. Lenders view Seaport office properties favorably given the submarket's modern building stock and strong tenant roster.
Cambridge and Kendall Square occupy a unique position driven by the life sciences industry. While overall lab vacancy has reached 36%, office space in Cambridge commands premium rents of $80 to $90 per square foot, reflecting proximity to Harvard, MIT, and the world's largest biotech cluster. Financing for Cambridge office and lab properties requires specialized underwriting that accounts for the unique characteristics of life sciences tenancy.
Route 128 and suburban markets offer lower rents of $25 to $42 per square foot with vacancy of 16% to 22%. These markets attract technology, life sciences, and back-office tenants seeking lower occupancy costs. Lenders finance suburban office properties at slightly wider spreads than urban Class A, reflecting the thinner tenant pool and greater competitive risk.
What Interest Rates Should Boston Office Property Buyers Expect?
Office property loan rates in Boston vary more widely than any other property type, reflecting the sharp differences in risk between stabilized Class A buildings and transitional or lower-quality assets.
Stabilized Class A office properties with strong tenancy and long weighted average lease terms command the best rates, starting at 5.18% to 6.50% for five to ten year fixed terms. These rates are available for properties in Back Bay, the Financial District, and the Seaport with 85% or higher occupancy and investment-grade or credit-quality tenants.
SBA 504 loans for owner-occupied office space offer blended effective rates of 5.50% to 6.50% when combining the bank first mortgage with the below-market SBA debenture. This program is particularly attractive for professional practices, technology companies, and financial services firms purchasing their own space.
Bridge loans for office repositioning and lease-up range from 7.50% to 10.50%, with pricing driven by the property's current occupancy, the scope of planned improvements, and the credibility of the borrower's leasing plan. Higher-vacancy buildings and conversion projects command rates at the upper end of this range.
Conversion financing carries rates of 8% to 11%, reflecting the complexity and risk of transforming office space into residential use. Lenders require detailed architectural plans, conversion cost estimates, and residential market analysis before committing capital.
Use our commercial mortgage calculator to estimate monthly payments at various rate scenarios for your Boston office acquisition.
For a comprehensive overview of all financing options in Boston, visit our Boston commercial loans hub.
How Do You Underwrite an Office Property in Boston's Current Market?
Underwriting office properties in Boston requires careful attention to several factors that have become more critical in the post-pandemic environment.
Tenant quality and lease rollover risk are the primary underwriting concerns. Lenders stress-test the rent roll against scenarios where tenants downsize or vacate at lease expiration. The weighted average lease term (WALT) directly influences the loan term a lender will offer. Properties with WALT of five years or more receive significantly better terms than those with near-term rollover exposure.
The flight to quality means lenders are evaluating not just the current tenancy but the building's ability to compete for tenants in the future. Modern HVAC systems, efficient floor plates, quality common areas, and proximity to transit all factor into the lender's assessment of a Boston office building's long-term viability.
Operating expenses in Boston's office market run higher than national averages due to elevated property taxes, energy costs (particularly heating during New England winters), and the higher cost of building services labor. Office buildings in downtown Boston typically carry total operating expenses of $18 to $28 per square foot, which significantly impacts net operating income and debt service coverage ratios.
Capital expenditure requirements have increased as older buildings compete with modern supply. Lenders evaluate the building's deferred maintenance, upcoming capital needs, and the capital reserve plan. Buildings requiring significant investment to remain competitive may face lender-required capital reserves or escrows.
What Are the Biggest Risks of Office Investing in Boston?
Boston office investment carries several significant risks that must be evaluated and mitigated in any acquisition or financing strategy.
Structural demand reduction is the most fundamental risk facing the office sector. Remote and hybrid work have permanently reduced the amount of office space per employee that tenants demand. While Boston's knowledge economy and life sciences sector provide some insulation, the city is not immune to this secular shift. Lenders are underwriting to lower occupancy assumptions than pre-pandemic, typically using 85% to 90% stabilized occupancy rather than the 95% or higher that was standard before 2020.
Tax base erosion threatens property values indirectly. Boston's office assessed values declined 9% in fiscal year 2025, and the city faces a potential $1.7 billion revenue shortfall over the next several years from declining commercial property values. This could result in higher tax rates for remaining commercial properties, increasing operating expenses and reducing NOI.
Conversion competition from the office-to-residential program could affect remaining office properties by reducing the total supply of office space, potentially helping absorption for well-positioned buildings, but also creating new residential supply that competes with multifamily investment returns.
Interest rate sensitivity is amplified for office properties because cap rates have expanded more than other property types. A stabilized Class A office building in Boston might trade at a 6.5% to 7.5% cap rate today compared to 5% to 6% in 2021. This repricing means that many properties purchased at peak values cannot be refinanced without significant equity contribution.
How Does Boston's Office-to-Residential Conversion Program Affect Financing?
Boston's Office to Residential Conversion Program has emerged as one of the most significant factors shaping the city's office lending landscape. The program has received 22 applications to convert 1.2 million square feet of office space across 27 buildings into 1,517 new homes, including 284 income-restricted units.
The program offers substantial financial incentives. Impact fees are waived for eligible conversion projects, and transfer tax exemptions apply. Five projects totaling 306 units are currently under construction, with the application period extended through December 31, 2026. Applicants must pull a full building permit and start construction by December 31, 2027.
For investors, conversion projects require a two-stage financing approach. The first stage involves a bridge or construction loan to fund acquisition and conversion, typically at 8% to 11% with 24 to 36 month terms. The second stage is permanent multifamily financing once the converted property achieves stabilized residential occupancy, at rates of 5.30% to 6.50% through agency or conventional programs.
Lenders are becoming more comfortable with conversion financing as successful projects establish comparable data points. The key underwriting factors include the building's structural suitability for conversion (floor plate size, window placement, plumbing infrastructure), the total development cost relative to the as-converted residential value, and the depth of residential demand in the building's specific location.
Properties in the Financial District and Downtown Crossing, where floor plates tend to be smaller and residential zoning is either in place or achievable, are the strongest conversion candidates. Larger Class A buildings with efficient floor plates are generally not conversion candidates due to the high cost of reconfiguring large open floors into residential units. Explore our construction loan programs for more on financing conversion projects.
What Is the Outlook for Boston Office Investment in 2026?
The outlook for Boston's office market in 2026 is cautiously optimistic for well-positioned assets and challenging for everything else.
The positive signals are real. Leasing activity reached its highest level since 2019. Full-floor tenant searches spiked 77% quarter-over-quarter in Q4 2025. Trophy and Class A rents in Back Bay and the Financial District have surpassed pre-pandemic levels. The life sciences sector, while recalibrating, continues to underpin demand in Cambridge and the broader metro.
The challenges are equally real. Vacancy remains roughly 10 percentage points above the historical average. Class B and C buildings face an uncertain future, with some destined for conversion and others facing prolonged vacancy. Property values have declined significantly, limiting refinancing options for owners who purchased at peak pricing.
For investors, the opportunity lies in the pricing reset. Properties trading at steep discounts to replacement cost, like the 99 High Street sale at $100 million below assessed value, offer entry points that may generate strong returns as the market recovers. Bridge financing provides the capital to acquire these properties, execute repositioning strategies, and ultimately refinance into permanent loans once value has been created.
Frequently Asked Questions About Office Loans in Boston
What is the minimum down payment for an office loan in Boston?
The minimum down payment depends on the loan program and the building's quality and occupancy. SBA 504 loans for owner-occupied office space require as little as 10% down. Conventional commercial mortgages for stabilized Class A office buildings typically require 30% to 40% down (60%-70% LTV). Bridge loans for transitional properties may require 25% to 35% equity. Hard money loans for distressed office properties require 35% to 45% down. The higher down payment requirements compared to multifamily reflect lenders' increased caution toward the office sector.
Can I get a loan for a vacant or mostly vacant office building in Boston?
Yes, but your options are limited to bridge loans and hard money financing. Conventional lenders require minimum occupancy of 80% to 85% to issue permanent financing. For a significantly vacant office building, bridge loans at 7.50% to 10.50% can fund acquisition and lease-up or conversion over 12 to 36 months. Hard money at 9% to 12.75% provides the fastest execution for distressed acquisitions. The key is demonstrating a credible path to either stabilized occupancy or conversion to an alternative use.
How does the office-to-residential conversion program affect my loan options?
Boston's conversion program improves financing options for eligible properties by reducing development costs (waived impact fees) and improving deal economics. Lenders are increasingly comfortable underwriting conversion projects as successful examples establish comparable data. You will typically need a two-stage financing approach: bridge or construction financing at 8% to 11% for the conversion period, followed by permanent multifamily financing at 5.30% to 6.50% once the property stabilizes as residential. Properties with smaller floor plates in the Financial District are the strongest candidates.
What cap rates should I expect for office properties in Boston?
Cap rates have expanded significantly since 2021. Stabilized Class A office buildings in Back Bay and the Financial District trade at 6.0% to 7.5% cap rates, compared to 5.0% to 5.5% at peak pricing. Class B properties trade at 7.5% to 9.5% or higher, reflecting the greater risk and uncertain leasing outlook. Suburban office properties along Route 128 and I-495 trade at 7.0% to 9.0% depending on tenancy and building quality. Distressed properties with significant vacancy may trade at effective cap rates above 10%.
Are lenders still willing to finance office properties in Boston?
Yes, but lenders are selective. Class A and trophy office buildings with strong tenancy, long lease terms, and modern amenities continue to attract competitive financing from banks, insurance companies, and debt funds. Lenders have reduced their exposure to Class B and C office properties, and many require higher equity, shorter terms, and additional protections such as cash flow sweeps or tenant-specific reserves. Bridge lenders and private credit firms have stepped in to fill the gap for transitional and value-add office deals.
How long does it take to close an office property loan in Boston?
Conventional office loans typically close in 45 to 75 days, somewhat longer than multifamily due to the complexity of office lease review and tenant creditworthiness analysis. SBA loans for owner-occupied office space take 60 to 90 days. Bridge loans can close in 21 to 45 days, with hard money closing in as little as 7 to 14 days. The appraisal process for Boston office properties has become more challenging given market volatility, which can add time to the closing process.
Contact Clear House Lending today for a free consultation on office property financing in Boston. Whether you are acquiring a stabilized Class A building, repositioning a value-add property, or exploring conversion opportunities, our team can connect you with the right lending solution.