Why Is Phoenix One of the Hottest Markets for Commercial Real Estate Lending?
Phoenix has established itself as one of the fastest-growing commercial real estate markets in the United States, and the lending environment reflects that momentum. With a metro population exceeding 5 million and consistent job growth driven by semiconductor manufacturing, healthcare, technology, and logistics, the Valley of the Sun continues to attract billions in commercial investment capital.
In 2025, Phoenix recorded over $3.2 billion in multifamily sales volume alone, while industrial net absorption exceeded 6 million square feet for the year. The TSMC semiconductor facility - representing over $40 billion in investment - has created ripple effects across every commercial property sector, from industrial warehousing to retail and multifamily housing for the expanding workforce.
Whether you are purchasing an apartment complex in Tempe, refinancing an office building on Camelback Corridor, or building ground-up retail in Gilbert, understanding your financing options is critical. This guide breaks down every major commercial loan program available in the Phoenix market, current rates, qualification requirements, and submarket-specific insights to help you secure the right deal.
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What Are Current Commercial Loan Rates in Phoenix?
Commercial mortgage rates in Phoenix have been tracking closely with national trends, though the strength of the local market can provide additional leverage during negotiations with lenders. As of late 2025, Arizona commercial mortgage rates ranged from approximately 5.11% to 5.94%, depending on loan type, property class, and borrower profile.
Here is a breakdown of what Phoenix borrowers can expect across the major loan categories:
- Conventional commercial mortgages: 5.50% to 7.25% for stabilized properties with strong occupancy
- SBA 504 loans: 5.25% to 6.50% for owner-occupied commercial properties
- SBA 7(a) loans: 6.00% to 8.50% depending on term and borrower qualifications
- Bridge loans: 8.00% to 12.00% for short-term financing and value-add projects
- DSCR loans: 6.50% to 8.75% based on property cash flow rather than personal income
- Hard money loans: 9.00% to 14.00% for fast closings and credit-challenged borrowers
- Construction loans: 7.00% to 10.00% for ground-up development
Rates are influenced by the Federal Reserve's monetary policy, the 10-year Treasury yield, property type, location within the metro, loan-to-value ratio, and the borrower's experience and financial strength. Fannie Mae projects broader mortgage rates trending toward 6.1% by the end of 2026, which could create additional opportunities for commercial borrowers who lock in competitive terms now.
Use our commercial mortgage calculator to estimate your monthly payments based on current Phoenix market rates.
Which Commercial Loan Programs Work Best in the Phoenix Market?
Phoenix's diverse economy and property mix mean that different loan programs serve different investment strategies. Here is a closer look at the most popular options and how they apply to the local market.
SBA Loans for Owner-Occupied Properties
Small Business Administration loans remain one of the most attractive options for business owners purchasing or expanding their own commercial space in Phoenix. The SBA 504 program offers up to 90% financing with below-market fixed rates, making it ideal for medical offices in Scottsdale, restaurants in downtown Phoenix, or auto repair shops in Mesa.
Key requirements include a minimum credit score of 680, at least two years in business, a down payment of 10% to 15%, and a debt service coverage ratio (DSCR) of at least 1.25x. Learn more about SBA loans for commercial real estate and how they compare to conventional financing.
Bridge Loans for Value-Add and Transitional Properties
Phoenix's high vacancy rates in the office sector - currently around 26.5% - create significant opportunities for investors willing to reposition underperforming assets. Bridge loans provide the short-term capital needed to acquire, renovate, and stabilize these properties before refinancing into permanent debt.
Bridge financing is especially popular in the Camelback Corridor and Midtown submarkets, where older Class B and C office buildings are being converted or upgraded to meet modern tenant demands. Terms typically range from 12 to 36 months with interest rates between 8% and 12%. Read our comprehensive bridge loan guide for a detailed breakdown of the process.
DSCR Loans for Investment Properties
For real estate investors who may not have traditional W-2 income, DSCR loans qualify borrowers based on the property's rental income rather than personal tax returns. In Phoenix, lenders typically require a DSCR of 1.0x to 1.25x, meaning the property's net operating income must equal or exceed its annual debt service by that ratio.
This program works particularly well for Phoenix multifamily acquisitions, where occupancy rates have stabilized around 93.5% and asking rents average approximately $1,541 per month. Use our DSCR calculator to see if your target property qualifies. You can also review the full DSCR loan requirements to prepare your application.
Hard Money Loans for Speed and Flexibility
Hard money loans prioritize the value of the collateral property over borrower creditworthiness, making them a critical tool for time-sensitive acquisitions and fix-and-flip projects. In Phoenix's competitive market, being able to close in 7 to 14 days can be the difference between winning and losing a deal.
These loans are commonly used for distressed property acquisitions, land purchases in fast-growing areas like Buckeye and Queen Creek, and situations where traditional financing timelines are too slow.
How Do Phoenix Submarkets Compare for Commercial Investment?
Greater Phoenix spans over 14,000 square miles and includes dozens of distinct submarkets, each with unique characteristics that affect both investment potential and lending terms. Understanding these differences is essential for choosing the right property and loan structure.
Downtown Phoenix
Downtown has undergone a significant transformation over the past decade, anchored by Arizona State University's downtown campus, the biomedical campus, and a growing roster of tech companies. Office vacancy remains elevated but is improving, and the area is seeing strong multifamily demand from young professionals. Average cap rates for multifamily properties in the downtown core range from 5.2% to 5.8%.
Scottsdale and Scottsdale Airpark
Scottsdale commands some of the highest rents and property values in the metro, with Class A office asking rates around $33.86 per square foot (full service gross). The Airpark submarket is a major employment center for financial services, technology, and healthcare companies. Investors targeting Scottsdale should expect higher acquisition costs but stronger long-term appreciation.
Tempe
Anchored by ASU's main campus and Tempe Town Lake, this submarket offers one of the most balanced profiles in the metro. Multifamily occupancy remains strong, and the area's growing lakefront employment base creates consistent demand across property types. Tempe is particularly attractive for DSCR loan strategies given its reliable rental income streams.
Chandler and Gilbert
These East Valley cities have experienced explosive growth, driven by the semiconductor and advanced manufacturing sectors. The TSMC facility in north Phoenix has boosted demand for housing, retail, and industrial space throughout the East Valley. Industrial cap rates in these submarkets range from 5.5% to 6.5%, with vacancy rates well below the metro average.
Camelback Corridor
The Camelback Corridor remains Phoenix's premier office submarket, stretching along Camelback Road from Central Avenue to Scottsdale. Despite metro-wide office challenges, this corridor continues to attract institutional tenants and commands premium rents. Bridge loan strategies for repositioning older assets here have generated strong returns for experienced investors.
Emerging Submarkets
Areas like Maryvale, South Phoenix, North Mountain, and the West Valley (Goodyear, Buckeye) are projected to see stronger-than-average rent growth due to limited new development and rising tenant demand. These markets often offer higher cap rates and lower entry points, making them attractive for investors using bridge or hard money financing to enter at a discount.
What Are the Key Property Sectors and Vacancy Trends in Phoenix?
Understanding vacancy rates, absorption trends, and cap rates by property type helps borrowers and investors identify where capital is flowing and where lending conditions are most favorable.
Industrial
Industrial real estate is Phoenix's strongest performing asset class. In Q4 2025, the industrial vacancy rate fell by 90 basis points quarter-over-quarter to 12.4%, its largest decline in over four years. Net absorption exceeded 6 million square feet for the year, driven by e-commerce fulfillment, advanced manufacturing, and logistics operations supporting the semiconductor supply chain. The Northwest submarket led new deliveries, while Mesa, Goodyear, and North Phoenix continue to attract build-to-suit projects.
Multifamily
Despite a record-breaking 6,018 new units delivered in Q3 2025 alone, Phoenix multifamily occupancy edged up to 93.5%, a 30-basis-point annual gain. Net absorption exceeded 3,500 units for the eighth consecutive quarter, bringing total 2025 absorption to 16,569 units. Asking rents averaged $1,541 per month, down 2% year-over-year, reflecting the impact of new supply on pricing.
Office
The Phoenix office market remains in transition. The overall vacancy rate decreased by 100 basis points in Q4 2025 to close the year at 26.5%, though Class A vacancy remains elevated at approximately 29%. Average asking lease rates rose to $30.95 per square foot (full service gross), a 1% year-over-year increase. Demand is stabilizing for modern, amenity-rich spaces in core submarkets while Class B and C properties present repositioning opportunities.
Retail
Retail vacancy has remained stable at approximately 6.5%, with the market fundamentals improving throughout 2025. Limited new supply, strong backfilling activity, and resilient consumer spending have kept this sector healthy. High-performing centers anchored by grocery, medical, or experiential tenants continue to draw investor interest, while older strip centers face longer lease-up periods.
What Do Lenders Require to Qualify for a Commercial Loan in Phoenix?
While specific requirements vary by loan program and lender, Phoenix commercial borrowers should be prepared to meet the following general thresholds:
Credit Score: Most conventional commercial loans require a minimum score of 680. SBA loans also use 680 as a benchmark. Hard money and bridge lenders may work with scores as low as 600, though rates will be higher.
Down Payment: Expect to put down 20% to 25% for investment properties and 10% to 15% for SBA owner-occupied loans. Bridge and hard money loans may require 25% to 35% equity.
Debt Service Coverage Ratio: Conventional lenders typically require a DSCR of 1.20x to 1.35x. SBA loans require 1.25x. DSCR loan programs may accept ratios as low as 1.0x depending on the property and borrower profile.
Loan-to-Value Ratio: Most commercial lenders cap LTV at 70% to 80% depending on property type. Multifamily properties often receive the most favorable LTV terms, while specialty properties like gas stations or hotels may see lower limits.
Experience: Many lenders, particularly for bridge and construction loans, want to see that the borrower has completed similar projects. First-time investors can still qualify but may face higher rates or additional reserve requirements.
Net Worth and Liquidity: Borrowers are generally expected to have a net worth at least equal to the loan amount and liquid reserves covering 6 to 12 months of debt service.
Get pre-qualified for your Phoenix commercial loan today - speak with our lending specialists.
How Does the Phoenix Commercial Loan Application Process Work?
The commercial loan process in Phoenix follows a structured path, though timelines can vary significantly depending on the loan type and property complexity.
Most conventional commercial loans take 45 to 90 days from application to closing. SBA loans typically require 60 to 120 days due to additional government approval layers. Bridge and hard money loans are designed for speed, with some closings happening in as few as 7 to 14 days.
Here is the general process:
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Pre-qualification (1-3 days): Submit a loan request with property details, purchase price, desired loan amount, and borrower financial summary. The lender provides a preliminary indication of terms.
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Application and Document Collection (1-2 weeks): Complete the formal application and submit documentation including tax returns, financial statements, rent rolls, operating statements, and property information.
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Underwriting (2-4 weeks): The lender analyzes the property's income, expenses, market position, and the borrower's financial strength. An appraisal is ordered during this phase.
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Appraisal and Environmental Review (2-3 weeks): A third-party appraiser evaluates the property. Phase I environmental assessments may be required, especially for industrial or older properties.
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Loan Committee Approval (1-2 weeks): The completed file is reviewed and approved by the lender's credit committee or investment committee.
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Closing (1-2 weeks): Legal documents are prepared, title insurance is obtained, and funds are disbursed.
What Makes Phoenix Different from Other Southwest Commercial Markets?
Phoenix competes with markets like Las Vegas, Denver, Austin, and Dallas for commercial real estate capital. Several factors distinguish the Phoenix market and affect lending dynamics:
Population Growth: Maricopa County added more than 55,000 new residents annually in recent years, fueling demand across all property sectors. This growth rate outpaces most competing Sun Belt markets.
Employment Diversification: The days of Phoenix being solely dependent on construction and tourism are over. The semiconductor industry (anchored by TSMC, Intel, and their suppliers), healthcare (Banner Health, Mayo Clinic), financial services (State Farm, USAA), and technology (Axon, GoDaddy) provide a diversified economic base that lenders value during underwriting.
Infrastructure Investment: The expansion of Loop 202, the continued development of the Valley Metro light rail system, and major airport improvements create accessibility that supports commercial property values across the metro.
Tax Environment: Arizona's relatively low corporate tax rate and business-friendly regulatory environment continue to attract corporate relocations and expansions, supporting demand for commercial space and favorable lending conditions.
Climate and Lifestyle: While not directly a lending factor, Phoenix's climate and lifestyle attract talent migration from high-cost coastal markets, which in turn drives demand for housing, retail, office, and industrial space.
What Are the Biggest Risks for Commercial Borrowers in Phoenix?
Every market carries risks, and Phoenix is no exception. Smart borrowers account for these factors when structuring their financing:
Water Supply Concerns: Arizona's long-term water availability remains a topic of discussion among investors and lenders. While Phoenix has invested heavily in water infrastructure and recycling, prolonged drought conditions could affect property values in certain areas, particularly for water-intensive uses like agriculture and some industrial operations.
Office Market Uncertainty: With vacancy rates still above 26%, the office sector presents both opportunity and risk. Borrowers pursuing office acquisitions should ensure conservative underwriting assumptions and consider bridge loan structures that provide flexibility during the lease-up period.
Supply Pipeline: Certain submarkets, particularly in the multifamily sector, have significant new supply in the pipeline. While absorption has been strong, an economic slowdown could create temporary oversupply conditions that affect rental rates and property values.
Interest Rate Sensitivity: Like all commercial markets, Phoenix property values are sensitive to interest rate movements. Borrowers should model multiple rate scenarios and consider interest rate locks or caps, particularly on floating-rate bridge and construction loans.
Frequently Asked Questions About Commercial Loans in Phoenix
What is the minimum down payment for a commercial loan in Phoenix?
The minimum down payment depends on the loan type and property. SBA loans require as little as 10% down for owner-occupied properties. Conventional commercial mortgages typically require 20% to 25% for multifamily and 25% to 30% for other property types. Bridge and hard money loans generally require 25% to 35% equity in the deal.
Can I get a commercial loan in Phoenix with bad credit?
Yes, though your options will be more limited and rates will be higher. Hard money lenders focus primarily on the property's value rather than borrower credit and may work with scores as low as 550-600. Bridge lenders typically require 620 or above. For the best rates and terms, a credit score of 700 or higher is recommended.
How long does it take to close a commercial loan in Phoenix?
Timelines vary significantly by loan type. Hard money loans can close in as few as 7 to 14 days. Bridge loans typically take 14 to 30 days. Conventional commercial mortgages require 45 to 90 days. SBA loans generally take 60 to 120 days due to government processing requirements.
What DSCR do Phoenix lenders require?
Most conventional commercial lenders in Phoenix require a DSCR of 1.20x to 1.35x. SBA loans require a minimum of 1.25x. DSCR-specific loan programs may accept ratios as low as 1.0x, meaning the property's income just covers debt payments. Higher DSCR ratios generally result in better rates and terms.
Are there special loan programs for Phoenix small business owners?
Yes. The SBA 504 and SBA 7(a) programs are specifically designed for small businesses purchasing or improving owner-occupied commercial property. Phoenix also has local economic development programs through the City of Phoenix Community and Economic Development Department and the Arizona Commerce Authority that can provide additional incentives for businesses creating jobs in targeted areas.
What property types are easiest to finance in Phoenix?
Multifamily properties (5+ units) typically receive the most favorable loan terms in Phoenix, including higher LTV ratios, lower rates, and longer amortization periods. Stabilized retail and industrial properties with strong tenants also attract competitive financing. Specialty properties like hotels, self-storage, and medical offices may require specialized lenders but remain very financeable given Phoenix's strong demand fundamentals.
What Should Your Next Step Be?
Phoenix's commercial real estate market offers compelling opportunities across every major property sector, from industrial warehouses capitalizing on the semiconductor boom to multifamily complexes absorbing the Valley's persistent population growth. The key to capturing these opportunities is securing the right financing structure for your specific situation.
Whether you are a first-time investor evaluating a small multifamily property in Mesa, an experienced developer planning a mixed-use project in downtown Phoenix, or a business owner looking to purchase your own space in Scottsdale, the lending programs and market conditions are in your favor.
Contact Clear House Lending today to discuss your Phoenix commercial real estate financing needs. Our team specializes in matching investors and business owners with the optimal loan program, from SBA and conventional financing to bridge loans and DSCR programs tailored for the Arizona market.
Sources: Select Commercial, Colliers Phoenix Market Reports, AZ Commercial Real Estate, Kidder Mathews Phoenix Reports, Cushman & Wakefield Phoenix MarketBeats, ROI Properties Phoenix Outlook 2025