Philadelphia Commercial Refinance Loans: Rate & Term Options [2026 Guide]

Philadelphia property owners face a critical refinancing window in 2026. With over $936 billion in commercial real estate loans maturing nationally this year and Center City office vacancy hovering at 20.4%, the stakes for getting your refinance strategy right have never been higher. Whether you hold a multifamily portfolio in Fishtown, an industrial warehouse near the Port of Philadelphia, or office space in the central business district, understanding your refinancing options can mean the difference between growing equity and losing it.

This guide breaks down everything Philadelphia commercial property owners need to know about refinancing in 2026, from current rate environments and lender requirements to Philadelphia-specific considerations like the 10-year tax abatement expiration and Pennsylvania transfer tax exemptions.

What Are the Current Commercial Refinance Rates in Philadelphia?

Philadelphia commercial mortgage rates start as low as 5.23% for qualified borrowers, though actual rates vary significantly based on property type, loan-to-value ratio, and borrower creditworthiness. The 10-year Treasury yield continues to hover above 4%, which serves as the benchmark for most fixed-rate commercial loans.

For multifamily properties, HUD and FHA loan programs offer rates starting around 5.64% to 5.94%, making them among the most competitive options for apartment building owners looking to refinance. Conventional commercial loans from banks and credit unions typically range from 6.5% to 8.5%, depending on the property class and borrower profile.

Philadelphia's rate environment compares favorably to many peer cities. The metro area's strong economic fundamentals, including job growth that outpaces many comparable markets, help support competitive lending terms. Borrowers with stabilized properties and strong debt service coverage ratios (DSCR) can often negotiate below-market rates, especially for DSCR-qualified loans on income-producing assets.

Why Is 2026 a Critical Year for Philadelphia Commercial Refinancing?

The commercial real estate industry is bracing for what analysts are calling the "2026 debt maturity crunch." Nearly $936 billion in CRE loans are scheduled to mature in 2026, representing almost 19% more maturities than 2025's revised estimates. This wave of maturing debt creates both urgency and opportunity for Philadelphia property owners.

Many of these loans were originated between 2016 and 2021 when interest rates were significantly lower. Borrowers who locked in rates below 4% are now facing a refinance environment where rates are 200 to 400 basis points higher. For a $5 million commercial loan, that difference translates to an additional $100,000 to $200,000 in annual debt service.

The good news for Philadelphia borrowers is that the Federal Reserve has signaled a more stable rate stance heading into 2026, with rates expected to level off or modestly decline. Lenders are also becoming more creative with loan structures to help bridge the gap, including interest-only periods, stepped rate increases, and hybrid adjustable-rate products.

If your loan matures in the next 12 to 18 months, starting the refinance process now gives you maximum leverage to negotiate terms and explore multiple lender options. Contact our team to discuss your timeline and options.

How Do Center City Office Owners Navigate Refinance Challenges?

Center City Philadelphia's office market presents one of the most complex refinancing environments in the region. The vacancy rate reached 20.4% in Q2 2025, driven by the lasting shift to remote and hybrid work arrangements. While this rate compares favorably to cities like Denver (36.1%) and Austin (33.2%), it remains well above the pre-pandemic norm of roughly 10%.

Lenders evaluating Center City office refinance applications are scrutinizing several key factors. Occupancy rates below 75% trigger additional underwriting requirements at most banks. Net operating income (NOI) compression from concessions and tenant improvement costs reduces the appraised value, often resulting in lower loan proceeds than the maturing balance.

For office owners facing a gap between their maturing loan balance and what a conventional lender will offer on refinance, bridge loan programs can provide crucial interim financing. Bridge loans typically carry higher rates (8% to 12%) but offer flexibility on terms and can be structured to allow time for lease-up strategies.

Class A office properties in prime Center City locations along Market Street and JFK Boulevard continue to attract lender interest, particularly those with strong tenant rosters and long-term lease commitments. Class B and C properties face steeper challenges, with cap rates climbing to 8.68% and 9.02% respectively, compressing available equity for refinancing.

Strategies that Philadelphia office owners are using to improve their refinancing position include converting underutilized floors to co-working or flex space, investing in building amenities to attract tenants, and in some cases exploring office-to-residential conversion feasibility studies that demonstrate a long-term value proposition to lenders.

What Multifamily Refinance Opportunities Exist in Philadelphia's Gentrifying Neighborhoods?

Philadelphia's multifamily sector tells a very different story from the office market. Average monthly rents are projected to reach $2,250 in 2025, and strong rental demand continues to support property values across the metro area. For multifamily owners, the refinancing environment offers genuine opportunities to lower costs, pull out equity, or restructure debt.

Neighborhoods experiencing rapid appreciation present particularly compelling refinance scenarios. Fishtown, South Kensington, Port Richmond, Brewerytown, and Germantown have seen significant value increases driven by infrastructure improvements, revitalization efforts, and demographic shifts. Property owners who acquired multifamily assets in these neighborhoods three to five years ago may find their buildings have appreciated 20% to 40%, opening the door to cash-out refinancing.

Multifamily cap rates in Philadelphia remain compressed, with Class A properties at 4.74%, Class B at 4.92%, and Class C averaging 5.38%. These tight cap rates translate to higher property valuations, which work in the borrower's favor when refinancing.

For value-add multifamily investors, completing renovations before refinancing is critical. A fully renovated building with market-rate rents in a gentrifying neighborhood will appraise significantly higher than the same property with below-market units. Lenders also favor properties where the borrower can demonstrate a track record of successful value-add execution.

Use our commercial mortgage calculator to estimate your monthly payments and determine how much equity you can access through a cash-out refinance.

How Does Industrial Portfolio Refinancing Work in the Philadelphia Market?

Philadelphia's industrial real estate sector continues to demonstrate exceptional strength. Year-to-date leasing in Q3 2025 climbed 23.5% year-over-year to 8.9 million square feet, and the metro area's strategic position as a logistics hub keeps demand robust. Over 41 million people live within a 150-mile radius of the city, and more than 40% of the U.S. population can be reached within a one-day drive.

Industrial property owners in Philadelphia enjoy some of the most favorable refinancing conditions in the current market. Cap rates for single-tenant industrial properties fall between 6.5% and 7.5%, while multi-tenant facilities trade at cap rates around 6%. These valuations, combined with strong rent growth and low vacancy, make industrial properties attractive to nearly every category of commercial lender.

For owners with multiple industrial properties, portfolio refinancing can offer significant advantages over refinancing individual assets. A portfolio approach allows borrowers to cross-collateralize stronger properties with weaker ones, potentially achieving better overall terms. It also reduces transaction costs and simplifies the borrowing relationship.

Rental rates for Philadelphia industrial space generally range from $5 to $12 per square foot per year for warehouse and distribution properties. Properties near the Port of Philadelphia, Philadelphia International Airport, and major interstate corridors (I-95, I-76, I-476) command premium rents and attract the most aggressive lending terms.

Major groundbreakings in eastern Pennsylvania during 2025, including several projects exceeding one million square feet, signal continued confidence in the market. Lenders view this pipeline as evidence of sustained demand, which supports favorable refinancing terms for existing industrial property owners.

What Impact Does the 10-Year Tax Abatement Expiration Have on Refinance Timing?

Philadelphia's 10-year tax abatement program has been a powerful driver of commercial and residential development for over two decades. Understanding how abatement expiration affects your property's financials is essential when planning a refinance.

For properties that received abatements before 2022, the full improvement value was exempt from real estate taxes for 10 years. When that abatement expires, the sudden increase in property tax expense can significantly reduce NOI and, by extension, the property's appraised value.

Starting in 2022, the program was modified so that commercial and industrial properties receive only a 90% exemption on the assessed improvement value for the 10-year period. This means newer properties will see a smaller but still meaningful tax increase when their abatement expires.

The timing of your refinance relative to abatement expiration matters. If your abatement expires within the next two to three years, refinancing before expiration locks in a higher appraised value based on current lower-tax NOI. After expiration, the reduced NOI will result in a lower appraisal and potentially lower loan proceeds.

Conversely, if you recently acquired a property where the abatement already expired, you may be operating at the "new normal" tax level, and any improvements you make to increase NOI will be reflected cleanly in your refinance appraisal without the looming tax increase.

Property owners should model both scenarios carefully. A property generating $500,000 in NOI with an active abatement might see that figure drop to $420,000 or lower after expiration, depending on the assessed improvement value and current millage rates. On a $5 million loan at a 7% cap rate, that NOI reduction could decrease appraised value by over $1 million.

How Do Pennsylvania Transfer Tax Rules Benefit Commercial Refinancing?

One significant advantage for Pennsylvania commercial property owners considering refinancing is the state's transfer tax exemption for refinance transactions. Unlike property sales, which trigger Pennsylvania's realty transfer tax, refinancing an existing mortgage does not constitute a transfer of ownership and is therefore exempt from transfer tax.

This is a meaningful benefit, especially in Philadelphia where the combined transfer tax burden is substantial. As of July 1, 2025, Philadelphia's realty transfer tax rate increased to 3.578%, on top of the state's 1% transfer tax. For a $10 million commercial property sale, that would equal $457,800 in transfer taxes. A refinance avoids this cost entirely.

However, there are important nuances to understand. If a refinance involves any change in ownership structure, even a partial transfer of membership interests in an LLC, it could trigger transfer tax liability. Entity-level transfers of 90% or more of interests in a real estate holding entity are treated as transfers of the underlying real estate for tax purposes.

For property owners considering bringing in new equity partners as part of a recapitalization strategy alongside refinancing, structuring the transaction carefully is essential. Consult with a Pennsylvania real estate attorney to ensure your refinance structure preserves the transfer tax exemption.

This transfer tax advantage makes refinancing particularly attractive compared to selling and repurchasing or bringing in new ownership. For owners who want to access equity, a cash-out refinance delivers liquidity without any transfer tax obligation, making it one of the most tax-efficient capital strategies available.

What Types of Commercial Refinance Loans Are Available in Philadelphia?

Philadelphia borrowers have access to a full spectrum of commercial refinance loan programs. The right program depends on your property type, financial goals, and timeline. Here is a breakdown of the primary options.

Conventional bank loans offer the lowest rates for stabilized properties with strong borrower profiles. Terms typically range from 5 to 10 years with 25 to 30-year amortization. Minimum loan amounts usually start at $500,000, and lenders require a DSCR of 1.25 or higher.

SBA 504 loans are available for owner-occupied commercial properties and offer up to 90% LTV with below-market fixed rates on the CDC portion. These loans work well for business owners who occupy at least 51% of their building and want to refinance into long-term fixed-rate debt.

CMBS (conduit) loans serve larger transactions, typically $2 million and above, and offer non-recourse financing with competitive rates. These loans are ideal for stabilized assets where the borrower wants to limit personal liability.

Bridge loans fill the gap when a property does not meet conventional underwriting standards. Whether you need time to stabilize occupancy, complete renovations, or navigate a lease-up period, bridge financing provides 12 to 36 months of flexible capital.

Debt fund and private capital options have expanded significantly in the Philadelphia market. These lenders often move faster than traditional banks and can accommodate more complex situations, including properties with environmental considerations, mixed-use projects, and value-add business plans.

What Documents Do You Need for a Philadelphia Commercial Refinance?

Preparing a complete loan package before approaching lenders accelerates the process and strengthens your negotiating position. Philadelphia lenders generally require the following documentation for commercial refinance applications.

Property-level documents include the current rent roll, trailing 12-month operating statements, two to three years of historical financial statements, copies of all leases, a recent property inspection or condition report, and the existing loan payoff statement.

Borrower-level documents include personal financial statements for all guarantors, two to three years of personal and entity tax returns, a schedule of real estate owned, a resume or track record of real estate experience, and entity formation documents (operating agreements, articles of organization).

For Philadelphia properties specifically, lenders may also request documentation related to the 10-year tax abatement status, any pending property tax assessment appeals, environmental Phase I reports (especially for industrial properties), and zoning confirmation letters from the Philadelphia Department of Licenses and Inspections.

Having these documents organized and ready when you begin the refinance process can shave two to four weeks off your closing timeline. Most Philadelphia commercial refinances close within 45 to 90 days, depending on the loan program and property complexity.

What Is the Step-by-Step Process for Refinancing Commercial Property in Philadelphia?

The commercial refinance process follows a structured path from initial assessment to closing. Understanding each phase helps you plan your timeline and avoid common delays.

The process begins with a property and financial assessment. This is where you evaluate your current loan terms, property value, and financial goals to determine whether refinancing makes sense. Calculate your breakeven point, factoring in any prepayment penalties on your existing loan.

Next comes the lender selection and application phase. Working with an experienced commercial mortgage broker who knows the Philadelphia market can save significant time and money. A broker can simultaneously submit your loan package to multiple lenders, creating competitive tension that drives better terms.

Once you select a lender and receive a term sheet, the underwriting phase begins. This typically takes 30 to 60 days and includes a third-party appraisal, environmental assessment, title search, and detailed financial analysis.

The closing phase involves legal review, document preparation, and funding. Philadelphia closings require coordination with the city's Department of Records for mortgage recording and any required transfer tax certifications.

What Are the Most Common Questions About Philadelphia Commercial Refinancing?

What is the minimum credit score needed for a Philadelphia commercial refinance?

Most conventional commercial lenders require a minimum credit score of 660 to 680 for the primary borrower or guarantor. SBA programs typically require 680 or higher. However, commercial loans are underwritten primarily on property cash flow rather than personal credit, so strong property performance can sometimes offset a lower credit score. Private and bridge lenders may accept scores as low as 600 for well-collateralized transactions.

Can I refinance a Philadelphia commercial property that is partially vacant?

Yes, but your options depend on the vacancy level. Properties with occupancy above 75% typically qualify for conventional refinancing, though at potentially lower leverage. For properties below 75% occupancy, bridge loans or transitional financing programs are usually required. Lenders will want to see a credible lease-up plan and sufficient reserves to cover debt service during the stabilization period.

How does Philadelphia's Wage Tax affect commercial refinance underwriting?

Philadelphia's wage tax (3.75% for residents, 3.44% for non-residents as of 2025) does not directly affect property-level underwriting for commercial refinances. However, for owner-occupied properties where the borrower's business income is a factor in qualification, the wage tax reduces take-home income and can affect personal debt service coverage calculations. Lenders familiar with the Philadelphia market account for this in their analysis.

Are there prepayment penalties when refinancing a Philadelphia commercial loan?

Most commercial loans include prepayment provisions, which vary by loan type. Bank loans typically have declining prepayment penalties (e.g., 5-4-3-2-1% over five years). CMBS loans often require yield maintenance or defeasance, which can be extremely costly if rates have risen since origination. SBA loans have three-year prepayment penalties. Understanding your current loan's prepayment terms is essential before committing to a refinance timeline.

What loan-to-value ratio can I expect on a Philadelphia commercial refinance?

Maximum LTV ratios vary by property type and loan program. Multifamily properties typically qualify for up to 75% to 80% LTV on conventional loans and up to 85% on agency programs. Office properties in the current market are generally limited to 60% to 70% LTV due to valuation uncertainty. Industrial properties can achieve 70% to 75% LTV. SBA 504 loans offer up to 90% LTV for owner-occupied commercial properties.

Do I need a new appraisal to refinance my Philadelphia commercial property?

Yes, virtually all commercial refinances require a current appraisal. The appraisal must be ordered by the lender (borrower-ordered appraisals are not accepted) and must conform to FIRREA requirements for federally regulated lenders. For Philadelphia properties, the appraiser should have specific experience with the local market, including knowledge of neighborhood-level value trends, the tax abatement program's impact on valuation, and current comparable sales data. Appraisal costs range from $3,000 to $10,000 depending on property size and complexity.

Philadelphia's commercial real estate market offers significant refinancing opportunities for prepared borrowers. Whether you are navigating office market headwinds, capitalizing on multifamily appreciation, or optimizing an industrial portfolio, the right refinance strategy can protect and grow your investment.

Ready to explore your Philadelphia commercial refinance options? Contact Clear House Lending today for a no-obligation consultation. Our team specializes in structuring creative financing solutions for Philadelphia commercial property owners, and we can help you evaluate your options across multiple loan programs and lenders.