San Diego commercial property owners face a refinancing environment shaped by forces unique to America's eighth-largest city. Over $930 billion in commercial mortgages are set to mature in 2026 nationally, and San Diego carries significant exposure across its multifamily, life sciences, industrial, and hospitality sectors. Life sciences vacancy in Torrey Pines and Sorrento Mesa has hit a record 31.2%, multifamily vacancy holds steady at 5.4%, and industrial demand in Otay Mesa continues benefiting from cross-border logistics with Mexico. Interest rates, though moderating from 2023 peaks, remain well above the levels at which most 2020-2022 vintage loans were originated.
This guide covers refinance strategies for San Diego commercial property owners: rate-and-term refinancing, cash-out programs, bridge-to-permanent transitions, and sector-specific strategies for life sciences, multifamily, industrial, and coastal assets. For a broader overview of national programs, visit our commercial refinance loans page.
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Why Is the 2025-2026 Maturity Wall Creating Urgency in San Diego?
The 2025-2026 maturity wall represents the largest concentration of commercial mortgage maturities in U.S. history. After approximately $104 billion matured in 2025, the calendar jumps 56% to roughly $162 billion in 2026. San Diego sits at a particularly acute pressure point because the city's 2020-2022 lending activity coincided with historically low interest rates, and those 3-year and 5-year term loans are now maturing in a fundamentally different rate environment.
Borrowers who locked in rates between 3.0% and 4.0% now face a market where California commercial mortgage rates start at 5.18% for the strongest credits and can exceed 7.5% depending on property type and leverage. An owner with a $10 million interest-only loan originated at 3.5% paid $350,000 annually in interest. Refinancing that same balance at 6.5% pushes the annual cost to $650,000, an 86% increase that directly compresses cash flow and threatens debt service coverage ratios.
San Diego's maturing debt spans property types that each face distinct local challenges. Life sciences office properties are maturing into record-high vacancy. Multifamily loans are coming due in a market where rent growth has flattened to 0.2% year-over-year. And industrial properties in the Otay Mesa corridor are maturing in a sector that benefits from cross-border trade flows but faces rising vacancy from new speculative construction. For well-capitalized borrowers, properties unable to refinance will come to market with motivated sellers, creating acquisition opportunities.
What Are Current Commercial Refinance Rates in San Diego?
As of early 2026, California commercial mortgage rates start as low as 5.18%, though actual pricing depends on property type, LTV, borrower strength, and loan structure. The 10-year Treasury yield near 4.50% and the 5-year Treasury at approximately 4.10% form the benchmark for most permanent commercial loans in the San Diego market. Forecasters project rates will stabilize between 5.5% and 6.5% through 2026, with the Federal Reserve's decision to end quantitative tightening in December 2025 providing some downward pressure.
Here is how rates currently break down by loan type for San Diego properties:
- Agency (Fannie Mae/Freddie Mac): 5.25% to 5.75% for qualifying multifamily properties with 5-10 year terms, up to 80% LTV
- CMBS: 5.50% to 6.50% for stabilized commercial properties at 60-75% LTV with 5-10 year terms
- Bank/Credit Union: 5.75% to 7.00% for relationship borrowers, typically 5-year terms with 25-year amortization
- Life Insurance Companies: 5.20% to 5.80% for low-leverage (under 60% LTV) Class A assets in prime San Diego locations
- Debt Funds/Private Lenders: 7.50% to 11.00% for transitional, value-add, or higher-leverage refinancing
- HUD/FHA 223(f): 5.50% to 5.90% for multifamily refinance with up to 35-year fully amortizing terms
- SBA 504: 5.50% to 6.50% for owner-occupied commercial properties with up to 90% LTV
San Diego borrowers benefit from a diverse lending landscape. National banks, California-based regional institutions, credit unions like San Diego County Credit Union (SDCCU), and private lenders all compete for commercial deals in the market. Estimate your monthly payments using our commercial mortgage calculator to run scenarios across different rate levels and loan terms.
How Is the Life Sciences Slowdown Affecting Office Refinancing in San Diego?
San Diego's life sciences sector, historically the crown jewel of the region's commercial real estate market, is reshaping the refinancing landscape in ways that no one anticipated three years ago. The region's core cluster vacancy rate hit a record 31.2%, up from 20.4% a year ago, according to JLL data. More broadly, life sciences vacancy across San Diego reached 26.5% at the close of Q3 2025, compared to 18.7% one year prior.
The geography of pain is uneven. The most sought-after biotech space in Torrey Pines, University City, and Sorrento Mesa still commands tenant interest from established pharmaceutical companies. Big Pharma names have actually been expanding, snapping up thousands of square feet as asking rents have fallen for 13 consecutive quarters and landlords offer generous concessions including free rent periods and renovation subsidies. Downtown San Diego has been hit hardest, with direct vacancy rates north of 90% for life science spaces.
For life sciences property owners seeking to refinance, tenant credit quality and lease term remaining are the two factors lenders scrutinize most. Buildings with Big Pharma tenants on long-term leases still attract competitive financing, while properties leased to early-stage startups face much tighter underwriting.
The bifurcation creates distinct paths. Class A lab space in Torrey Pines with credit tenants can access CMBS or life company rates from 5.50% to 6.50%. Speculative or partially vacant lab buildings face LTV caps of 50-55% and rates of 7.0% to 9.0% from bridge lenders. Properties with significant rollover risk should explore bridge loan programs as interim solutions. Analysts project three to five years before vacancy returns to single digits, so owners with loans maturing in 2026-2027 need to act now.
What Multifamily Refinance Opportunities Exist in San Diego's Tight Supply Market?
San Diego's multifamily market presents the strongest refinancing story among the city's major property types. The combination of constrained housing supply, geographic limitations on new construction, and sustained population demand creates fundamentals that lenders find compelling.
The numbers tell a stable story. San Diego's multifamily vacancy rate held at 5.4% in Q2 and Q3 2025, steady quarter over quarter and below the prior year's peak. Average cap rates have held at approximately 4.5% for three consecutive years, though Q3 2025 showed cap rates rising to 5.7% in some transactions, reflecting higher interest rates and flattening rent growth. Rent growth registered at just 0.2% year-over-year in Q3 2025, well below the long-term 3.1% average, as economic strain among renter households and widespread concessions tempered gains.
San Diego's geography is the multifamily investor's best friend. The city is hemmed in by the Pacific Ocean, Camp Pendleton, mountains, and the Mexican border, limiting new construction in ways that do not exist in sprawling metros like Houston or Phoenix. Class A luxury apartments in Little Italy, the Gaslamp Quarter, La Jolla, and Del Mar face the most pressure from new supply, with Class A vacancy reaching 10.2%. Class B and C properties in North Park, Hillcrest, City Heights, and Chula Vista benefit from structurally limited competition.
For multifamily owners refinancing in San Diego, agency lenders remain the dominant capital source, offering rates between 5.25% and 5.75% with LTVs up to 80%. San Diego apartment loan rates start as low as 5.11% for the strongest credits. HUD/FHA 223(f) refinancing offers 35-year fully amortizing terms at the lowest rates. Evaluate whether your property's income supports the new debt service using our DSCR resources.
How Is Industrial Refinancing Performing in the Otay Mesa Cross-Border Corridor?
San Diego's industrial sector, particularly properties in the Otay Mesa submarket that serves cross-border logistics with Mexico, represents a compelling refinancing story driven by trade infrastructure and scarcity of development sites.
Otay Mesa accounts for 17% of San Diego's 21.8 million square feet of industrial inventory and handles roughly two-thirds of all cross-border trade between California and Mexico. More than one million northbound trucks crossed the existing Otay Mesa Port of Entry in 2023, and the upcoming Otay Mesa East Port of Entry, expected to open in late 2027, will significantly expand capacity and drive additional demand for warehouse and distribution space in the corridor.
The development pipeline is active. JLL Capital Markets arranged $102.4 million in construction financing for the first phase of Otay Business Park, delivering 612,240 SF of Class A industrial space in mid-2026, with full buildout reaching 1.78 million SF across nine buildings. This new supply has pushed vacancy to the 7-8% range, the highest in roughly ten years.
Despite rising vacancy, industrial refinancing remains favorable. Institutional lender appetite for industrial collateral exceeds every other asset class, with life insurance companies and CMBS lenders offering rates from 5.20% to 6.50% at up to 75% LTV. Properties with long-term leases to credit tenants in cross-border logistics command the most competitive terms.
For industrial property owners with 2020-2022 vintage loans, values have held up better than office or retail. The cross-border logistics advantage is structural and growing. If your industrial property needs interim financing, consider our bridge loan programs for a short-term solution.
What Should Coastal Property Owners Know About High-Value Refinancing in San Diego?
San Diego's coastal real estate in La Jolla, Del Mar, Coronado, and Pacific Beach commands some of the highest per-square-foot valuations in California. These premium valuations can support lower LTV ratios, giving borrowers access to the most competitive rate tiers. However, coastal properties also face higher insurance costs, including flood and earthquake coverage that inland San Diego properties may not require.
Hospitality refinancing is particularly relevant for San Diego's coastal market. The city's tourism economy supports a robust hotel and resort market, and properties with strong trailing-12-month RevPAR and occupancy above 70% can access CMBS or bank financing at 5.75% to 7.00%. California Coastal Commission regulations, sea-level rise planning requirements, and local building restrictions add complexity to underwriting. Borrowers should be prepared to document coastal development permits, seawall maintenance, and regulatory compliance.
For high-value coastal properties, life insurance companies often provide the most competitive terms. Their preference for low-leverage, high-quality assets aligns with coastal San Diego properties where appraised values support sub-60% LTV ratios, with rates from 5.20% to 5.80%.
How Does California's Proposition 13 Benefit Commercial Refinancing?
California's Proposition 13 creates a significant structural advantage for commercial property owners who refinance rather than sell. Under Prop 13, commercial property is assessed at its purchase price and can only increase by a maximum of 2% per year, regardless of market appreciation. A commercial building purchased in San Diego for $5 million in 2010 might have an assessed value of approximately $6.8 million today, even if its market value has risen to $12 million or more.
The critical point: refinancing does not trigger a reassessment under Proposition 13 as long as there is no change of title. You can refinance, extract equity through a cash-out program, or change your loan structure entirely, and your assessed value remains unchanged. Selling, by contrast, resets the assessed value to the purchase price and erases decades of Prop 13 savings.
This creates a powerful incentive to refinance and hold rather than sell. Cash-out refinancing allows you to access built-up equity without losing the tax advantage. However, under current California law, a change of control or ownership of the entity that holds the property causes a reassessment. Restructuring ownership as part of a refinancing, such as bringing in new equity partners who take a controlling interest, could trigger reassessment even without a direct sale. Work with a California real estate tax attorney to preserve your Prop 13 basis.
What Is the Difference Between Rate-and-Term and Cash-Out Refinancing in San Diego?
Rate-and-term refinancing replaces your existing loan with a new one to secure a lower interest rate, extend the loan term, or convert from a floating rate to a fixed rate. The new loan amount roughly matches the outstanding balance. This strategy works best when rates have declined since origination or when a borrower needs to transition from a maturing bridge loan into permanent financing.
Cash-out refinancing allows you to borrow more than your current loan balance, extracting built-up equity as liquid capital. In San Diego, cash-out programs typically allow up to 75% LTV on most commercial property types, and Fannie Mae and Freddie Mac multifamily programs can reach 75-80% LTV.
San Diego borrowers should factor in California-specific costs when comparing refinance options. While California does not impose a mortgage recording tax like New York, closing costs in San Diego typically run 1.5% to 3.0% of the loan amount, reflecting higher appraisal costs, environmental review requirements, and California title insurance premiums. Property tax, while protected by Prop 13 for existing owners, averages approximately 1.1% of assessed value in San Diego County.
In the current San Diego market, cash-out refinancing is particularly strategic for owners of long-held properties with significant Prop 13 savings. Rather than selling (which triggers reassessment and capital gains taxes), extracting equity through a cash-out refinance preserves the low tax basis while providing capital for new acquisitions, renovations, or portfolio diversification.
How Should San Diego Borrowers Prepare for a Commercial Refinance?
Successful refinancing requires preparation that starts 12-18 months before maturity. Here is a practical timeline for San Diego commercial property owners.
18 months before maturity: Order a preliminary property valuation and review your current loan documents for prepayment provisions. Begin assembling updated financials, including trailing-12-month operating statements, rent rolls, and capital expenditure history. For life sciences properties, document tenant credit quality and weighted average lease term in detail.
12 months before maturity: Engage a commercial mortgage broker or begin direct lender outreach. San Diego's lending market includes national banks, California regionals, credit unions, and private lenders. Target 4-6 quotes minimum to ensure competitive pricing. For properties with strong DSCR ratios, this lead time allows you to shop multiple lenders and secure optimal terms.
6-9 months before maturity: Lock your rate, complete the application, and begin the appraisal and environmental review process. San Diego properties typically require Phase I environmental assessments, seismic risk evaluations (especially for older buildings), and flood zone determinations for coastal properties.
3 months before maturity: Finalize legal review, complete title work, and coordinate closing. Budget for California title insurance premiums, which tend to run higher than national averages.
Budget 1.5% to 3.0% of the total loan amount for closing costs on a standard San Diego commercial refinance, including title insurance (0.30% to 0.60%), appraisal and environmental review ($5,000 to $25,000), legal fees ($12,000 to $35,000), lender origination (0.50% to 1.50%), seismic assessment ($3,000 to $8,000 for older structures), and insurance reserves (3-12 months escrowed at closing).
What Loan Programs Work Best for Different San Diego Property Types?
The ideal refinancing program depends on property type, condition, submarket location, and borrower objectives. Here is how different San Diego asset classes typically match to loan programs.
Multifamily (5+ units): Agency loans offer the most competitive terms with up to 80% LTV. San Diego's constrained supply makes multifamily the easiest asset class to refinance.
Life Sciences/Biotech Office: The most complex refinancing in San Diego. Credit tenants on long-term leases in Torrey Pines and UTC access competitive rates. Vacant lab space faces bridge lending terms.
Industrial/Logistics: Strong lender demand, especially in the Otay Mesa cross-border corridor. Properties tied to Mexico trade logistics command premium valuations.
Hospitality/Hotels: Year-round tourism supports hotel refinancing via CMBS and bank programs. Coastal resort properties attract life company interest.
Retail: Grocery-anchored retail in corridors like Convoy Street and Mira Mesa Boulevard finances well. Tourist retail near the waterfront benefits from San Diego's visitor economy.
Ready to refinance your San Diego commercial property? Contact our team for a no-obligation quote tailored to your property type and situation.
Frequently Asked Questions
What is the minimum DSCR required for a commercial refinance in San Diego?
Most lenders require a minimum DSCR of 1.20x to 1.25x for stabilized properties. Agency multifamily lenders may accept 1.15x to 1.20x in high-demand submarkets like La Jolla or North Park. Life sciences office faces stricter requirements at 1.30x to 1.50x. Industrial with long-term credit tenants in Otay Mesa may qualify at 1.20x. Evaluate your property using our DSCR resources.
Does refinancing trigger a Proposition 13 reassessment?
No. Refinancing alone does not trigger reassessment as long as there is no change of title or change of control of the owning entity. You can refinance, restructure loan terms, or complete a cash-out refinance without affecting your assessed value. However, bringing in new equity partners who take a controlling interest could trigger reassessment. Consult a California real estate tax attorney before restructuring ownership.
How long does a commercial refinance take in San Diego?
Bank loans typically close in 45-60 days. CMBS loans require 60-90 days. Agency loans close in 45-75 days. HUD/FHA 223(f) loans take 6-12 months. Bridge loans can close in 2-4 weeks. Coastal properties may require additional time for environmental and Coastal Commission compliance review.
Can I refinance a San Diego life sciences building with high vacancy?
Options narrow significantly above 20-25% vacancy. Conventional lenders want 75%+ occupancy and 1.25x+ DSCR. Bridge lenders offer transitional financing at 7.5% to 11.0% with 1-3 year terms. Given that analysts project three to five years for vacancy to return to single digits, plan your capital structure around a longer stabilization timeline.
What earthquake and environmental insurance do San Diego lenders require?
Most lenders require seismic risk assessments for older buildings, particularly those built before modern seismic codes. Earthquake insurance is increasingly common for properties in fault zones. Coastal properties may need flood insurance. Environmental Phase I/Phase II assessments are standard for industrial properties, especially those near former military sites. Budget these costs into your refinancing timeline.
Is now a good time to refinance commercial property in San Diego?
For borrowers with loans maturing in 2026-2027, waiting carries risk. The current window offers rates starting at 5.18%, active lender competition, and sufficient liquidity for most property types except distressed life sciences office. Multifamily and industrial borrowers are in the strongest position. Contact our team to discuss timing specific to your property.