Why Is Los Angeles One of the Most Active Markets for Commercial Real Estate Loans?
Los Angeles is the second-largest metro economy in the United States and one of the most dynamic commercial real estate markets in the world. With a GDP exceeding $1 trillion, LA attracts investors across every property type, from multifamily apartments in the San Fernando Valley to industrial warehouses near the Port of Long Beach. Whether you are acquiring your first investment property or refinancing a stabilized portfolio, understanding the lending landscape is critical to maximizing returns in this competitive market.
As of early 2026, commercial mortgage rates in Los Angeles start as low as 5.18%, though actual rates range from roughly 5.2% to 12.75% depending on the loan program, property type, and borrower profile. The CBRE Lending Momentum Index rose 112% year-over-year in Q3 2025, signaling the highest lending activity since 2018. That surge in capital availability means more options for LA investors, but it also means you need a clear strategy to secure the best terms.
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This guide covers everything you need to know about securing commercial financing in Los Angeles, including current rates, loan programs, submarket conditions, and step-by-step application guidance. If you are ready to discuss your deal, contact our team today for a free consultation.
What Are the Current Commercial Loan Rates in Los Angeles?
Commercial loan rates in Los Angeles fluctuate based on the loan product, lender type, and risk profile of the deal. Here is a breakdown of where rates stand heading into 2026:
- Conventional commercial mortgages: 5.18% to 7.50% for stabilized properties with strong borrower credit
- SBA 504 loans: 5.50% to 6.75% with fixed-rate first-mortgage portions and CDC second-lien financing
- SBA 7(a) loans: 6.00% to 8.50% depending on loan size and variable-rate structure
- Bridge loans: 8.00% to 15.00% for short-term, interest-only financing with 6 to 24 month terms
- Hard money loans: 7.50% to 12.00% for commercial properties, with funding possible in 5 to 7 days
- DSCR loans: 6.25% to 8.50% based on property cash flow rather than personal income verification
- HUD/FHA multifamily: 5.64% to 5.94% for qualifying apartment properties
The prime rate has settled at 6.75% as of December 2025 after peaking above 8% in 2023 and 2024. This decline has spurred more borrowing and refinancing activity across the LA market.
To estimate your monthly payments and qualifying ratios, use our commercial mortgage calculator. For income-based qualification, our DSCR calculator can help you determine whether your property's net operating income meets lender thresholds.
What Loan Programs Are Available for Los Angeles Commercial Properties?
LA investors have access to a wide range of financing options. The right program depends on your property type, timeline, and investment strategy.
Conventional Commercial Mortgages
Traditional bank loans offer the lowest rates for stabilized, income-producing properties. Expect LTV ratios of 65% to 75%, DSCR requirements of 1.25x or higher, and amortization periods of 20 to 30 years. These loans work best for office buildings, retail centers, and multifamily properties with strong occupancy.
SBA Loans
The SBA loan program is ideal for owner-occupied commercial properties in Los Angeles. The SBA 504 program provides up to 90% financing with below-market fixed rates, while the 7(a) program offers more flexibility for mixed-use and specialty properties. DSCR requirements are typically 1.20x for 504 loans and 1.25x for 7(a) loans. For a deeper dive, read our SBA loan guide for commercial real estate.
Bridge Loans
For investors who need to move quickly on acquisitions, value-add repositioning, or properties that do not yet qualify for permanent financing, bridge loans provide short-term capital at rates from 8% to 15%. Terms run 6 to 24 months with interest-only payments. Our commercial bridge loan guide explains how to structure these deals effectively.
DSCR Loans
Debt service coverage ratio loans qualify borrowers based on property cash flow rather than personal income. This makes DSCR financing popular among investors with multiple properties or self-employed borrowers. Minimum DSCR requirements typically range from 1.0x to 1.25x. Learn more about DSCR loan requirements and how they apply to LA investment properties.
Hard Money Loans
When speed and flexibility matter more than rate, hard money loans can close in as few as 5 to 7 business days. Rates range from 7.50% to 12.00% with LTV up to 80% on commercial properties. These loans are commonly used for fix-and-flip projects, land acquisitions, and distressed property purchases across Los Angeles.
What Does the Los Angeles Commercial Real Estate Market Look Like in 2025?
The Los Angeles commercial real estate market is in a transitional phase. While the office sector continues to face headwinds, industrial, retail, and multifamily sectors are showing signs of stabilization and, in some cases, renewed strength.
Office Market
The LA office market remains under significant pressure. Overall vacancy stands at 24.5%, up 150 basis points year-over-year, with Downtown LA surpassing 31% vacancy, the highest in the region. Trophy and Class A properties in Century City continue to outperform, recording just 13.6% vacancy compared to 8.4% cap rates on Class A and 9.02% on Class C buildings. Leasing activity showed early signs of recovery with 3.4 million square feet leased in Q1 2025, though demand remains highly selective.
Industrial Market
Industrial properties remain LA's strongest sector, driven by e-commerce fulfillment and proximity to the ports of Los Angeles and Long Beach. Vacancy has risen to approximately 4.6% in Q4 2025, the highest in a decade but still well below the national average of 7.0%. Lease rates continue climbing from $1.25 per square foot in 2022 to a projected $1.40 per square foot in 2025, reflecting 3.8% annual growth.
Multifamily Market
Multifamily continues to outperform national averages. Rents reached $2,652 per month in Q2 2025 with occupancy holding steady at 96%. Cap rates on Class A multifamily compressed to 4.74%, while Class B assets sit at 4.92%. Wildfire displacement in early 2025 further tightened demand for available units in several submarkets.
Retail Market
Retail vacancy has leveled off at approximately 5.9% in LA County. Lease rates continue to rise from $2.90 per square foot in 2022 to a projected $3.10 per square foot in 2025. Grocery-anchored and luxury retail centers are outperforming thanks to consistent consumer traffic. At an average of $35 per square foot, LA retail rents widely surpass the national average.
Which Los Angeles Submarkets Offer the Best Investment Opportunities?
Los Angeles is not a single market but a collection of distinct submarkets, each with its own risk-return profile. Here are the key areas investors should evaluate:
Downtown Los Angeles (DTLA)
DTLA has the highest office vacancy in the region at over 31%, which creates both risk and opportunity. Value-add investors and adaptive reuse developers are finding deals on distressed office buildings that can be converted to residential, creative office, or mixed-use projects. The Arts District and South Park neighborhoods continue to attract institutional capital for ground-up multifamily development.
Westside (Century City, Santa Monica, West LA, Culver City)
The Westside commands premium rents and the lowest vacancy rates in the metro. Century City in particular is capturing a substantial share of the region's office leasing activity as tenants migrate from downtown. Culver City has transformed into a tech hub, attracting companies like Amazon and Apple, which has driven demand for both office and retail space.
San Fernando Valley
The Valley offers relatively affordable entry points for commercial investors, with particularly tight rental markets for multifamily properties. Industrial space near Burbank and North Hollywood benefits from proximity to entertainment industry production facilities. Retail along Ventura Boulevard remains highly sought after.
South Bay (Torrance, El Segundo, Long Beach)
South Bay industrial properties benefit from direct access to the ports and LAX. El Segundo has emerged as a strong office submarket thanks to its proximity to aerospace and tech employers. Long Beach offers multifamily and mixed-use opportunities at lower price points than the Westside.
Hollywood and Silver Lake
Hollywood continues to attract entertainment and media tenants, while Silver Lake is a magnet for young professionals and creatives. Both neighborhoods see strong demand for retail and mixed-use commercial spaces. West Adams, nearby, is emerging as a hotspot for redevelopment projects with historic architecture and central location.
What DSCR and LTV Requirements Do Lenders Expect for LA Deals?
Lender underwriting standards for Los Angeles commercial properties vary by loan type and property class, but here are the benchmarks you should plan around:
A DSCR target of 1.25x to 1.35x is realistic and competitive for well-located, stable assets. LTV expectations range from 65% to 75% for strong deals, though the market average is closer to 63%. Higher-leverage options exist through SBA programs (up to 90% LTV) and bridge/hard money lenders (up to 80% LTV).
For office properties, lenders are applying more conservative underwriting due to elevated vacancy. Expect DSCR requirements of 1.30x or higher and LTV caps of 60% to 65% for Class B and C office buildings. Industrial and multifamily properties with strong occupancy can still achieve 75% LTV with DSCR as low as 1.20x.
To see how your property's income stacks up against these thresholds, run your numbers through our DSCR calculator.
How Do You Apply for a Commercial Loan in Los Angeles?
Securing commercial financing in LA follows a structured process. Here is what to expect from initial inquiry through closing:
Step 1: Pre-qualification. Gather your property financials, personal financial statement, and investment summary. A lender will review your deal at a high level to determine which programs fit.
Step 2: Loan application. Submit a formal application with supporting documents including rent rolls, operating statements (trailing 12 months), tax returns, and a property appraisal or valuation.
Step 3: Underwriting. The lender evaluates the property's income, market conditions, borrower creditworthiness, and collateral value. For Los Angeles properties, appraisals can take 3 to 6 weeks due to market complexity.
Step 4: Term sheet and approval. Once underwriting is complete, you will receive a term sheet outlining the rate, LTV, amortization, prepayment terms, and any reserves or escrows required.
Step 5: Closing. After accepting the term sheet, the lender orders title work, environmental reports, and finalizes legal documents. Closing typically takes 30 to 60 days for conventional loans, though bridge and hard money loans can close in as few as 7 to 14 days.
Ready to get started? Reach out to our lending team to discuss your Los Angeles deal and get pre-qualified.
What Are the Biggest Challenges Facing LA Commercial Borrowers?
Los Angeles presents unique challenges that borrowers must navigate:
High property values. LA's median commercial prices are among the highest in the nation, which means larger loan amounts, higher down payments, and more equity required for each deal.
Regulatory complexity. Los Angeles has some of the most complex zoning, entitlement, and rent control regulations in the country. The city's Rent Stabilization Ordinance affects many multifamily properties, and new construction faces lengthy permitting timelines.
Environmental and seismic requirements. Many properties require Phase I environmental assessments, and seismic retrofit requirements (particularly the soft-story ordinance) can add significant costs to acquisitions.
Wildfire risk. The devastating wildfires of early 2025 have heightened insurance costs and lender scrutiny for properties in high-fire-severity zones. Insurance availability and pricing have become a critical underwriting factor.
Market volatility by sector. While industrial and multifamily remain strong, the office market's 24.5% vacancy rate creates risk for investors in that sector. Lenders are pricing this risk into their terms with higher rates and lower leverage for office properties.
What Should You Know About Commercial Loan Costs and Fees in Los Angeles?
Beyond the interest rate, LA commercial borrowers should budget for these additional costs:
- Origination fees: 0.50% to 2.00% of the loan amount for conventional loans; 1.5 to 3 points for bridge and hard money
- Appraisal fees: $3,000 to $10,000 depending on property complexity
- Environmental reports: $2,000 to $5,000 for Phase I; $10,000+ for Phase II if triggered
- Title and escrow: Varies by deal size, typically $5,000 to $15,000
- Legal fees: $5,000 to $20,000 for borrower's counsel
- Prepayment penalties: Defeasance, yield maintenance, or step-down structures depending on the loan type
How Do Cap Rates in Los Angeles Compare Across Property Types?
Cap rates are a fundamental metric for evaluating commercial investment returns and they directly impact your financing options. Here is how LA cap rates compare heading into 2026:
Multifamily properties command the lowest cap rates (4.74% to 4.92%), reflecting strong investor demand and stable cash flows. Office cap rates have risen to 8.4% for Class A and above 9.0% for Class C, presenting potential value-add opportunities for well-capitalized investors who can weather elevated vacancy. Industrial cap rates have expanded 100 to 150 basis points from their 2021 lows but remain competitive at roughly 5.0% to 6.0% for prime logistics assets.
These cap rate spreads directly affect your loan terms. Properties with lower cap rates and higher values generally qualify for better financing, while higher-cap-rate assets may require more equity or subordinate financing.
Frequently Asked Questions About Commercial Loans in Los Angeles
What is the minimum down payment for a commercial loan in Los Angeles?
Most conventional commercial loans require 25% to 35% down (65% to 75% LTV). SBA 504 loans allow as little as 10% down for owner-occupied properties. Bridge and hard money lenders typically require 20% to 30% equity. The exact requirement depends on the property type, borrower experience, and current market conditions.
How long does it take to close a commercial loan in LA?
Conventional commercial mortgages typically close in 45 to 90 days. SBA loans can take 60 to 120 days due to additional government approval steps. Bridge loans and hard money loans can close in as few as 7 to 14 days, making them ideal for time-sensitive acquisitions.
What credit score do I need for a commercial loan in Los Angeles?
Most conventional lenders require a minimum credit score of 680, though 700+ will qualify you for better rates. SBA loans typically require 680 or higher. Hard money and bridge lenders are more flexible, with some accepting scores as low as 600, since they focus primarily on the property's value and income.
Are commercial loan rates in Los Angeles higher than the national average?
Not necessarily. While LA property values are higher than most markets, commercial loan rates are driven primarily by national capital markets, Treasury yields, and lender competition. LA's large and liquid market actually attracts significant lender competition, which can result in rates comparable to or even below national averages for quality deals.
Can I get a commercial loan for a mixed-use property in Los Angeles?
Yes. Mixed-use properties are common in Los Angeles, and most loan programs accommodate them. If the property is at least 51% owner-occupied, SBA loans may be available. For investment mixed-use properties, conventional commercial loans and DSCR loans are the most common options. Lenders will evaluate both the residential and commercial income streams.
What impact did the 2025 wildfires have on LA commercial lending?
The January 2025 wildfires significantly impacted insurance availability and costs across Los Angeles. Lenders now require more thorough insurance documentation and may impose additional reserves for properties in high-fire-severity zones. Some insurance carriers have withdrawn from certain LA zip codes, making it essential to secure coverage before entering a loan application. The multifamily market saw increased demand as displaced residents sought housing in unaffected areas.
If you are considering a commercial real estate investment in Los Angeles, the current market offers opportunities across multiple property types and submarkets. Whether you need a bridge loan for a quick acquisition, an SBA loan for your owner-occupied property, or a DSCR loan for a cash-flowing investment, the right financing structure can make all the difference. Contact Clear House Lending today to discuss your Los Angeles deal and get a customized loan quote.
Sources: Select Commercial, Cushman & Wakefield Greater LA MarketBeats, CBRE Greater Los Angeles 2025 Outlook, Philippe Properties LA Market Report, Crexi LA Market Report 2025, NAI Capital Year-End Review 2025, Terrydael Capital DSCR/LTV Guide