What Are the Current Commercial Refinance Rates in San Francisco?
Commercial refinance loan rates in San Francisco start at approximately 5.18% as of February 2026, though actual rates vary significantly based on property type, leverage, borrower qualifications, and loan structure. The refinancing landscape in San Francisco has reached a critical inflection point as the city's commercial real estate market shows genuine signs of recovery after several years of uncertainty, while a massive wave of maturing debt creates both urgency and opportunity for property owners.
The national average rate on newly originated commercial real estate loans stands at 6.24%, a notable increase from the 4.76% average on maturing debt. This gap between old and new rates represents the core challenge facing San Francisco property owners whose loans are coming due. For a $5 million loan, the difference between a 4.76% and 6.24% rate translates to roughly $74,000 in additional annual debt service, a meaningful impact on cash flow and investment returns.
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San Francisco's refinance market is shaped by the broader national maturity wall: over $1.5 trillion in commercial real estate loans will mature by the end of 2026, with 2026 alone bringing an estimated $936 billion in maturities, nearly 19% more than the revised 2025 estimate. Within the CMBS sector, over $100 billion in loans will mature in 2026, with more than half facing potential default risk at maturity. For San Francisco property owners, understanding this competitive landscape is essential to securing favorable refinance terms.
The Federal Reserve cut the federal funds rate three times in late 2024, by 50 basis points in September and 25 basis points each in November and December. However, the pace of further cuts has slowed significantly in 2025 and 2026, with the Fed signaling only two additional cuts. This means commercial refinance rates are unlikely to return to the sub-4% levels that characterized the pre-2022 market, and borrowers should plan their refinance strategies based on the current rate environment rather than waiting for substantially lower rates.
Which San Francisco Property Types Are Best Positioned for Refinancing?
The refinancing outlook varies dramatically by property type in San Francisco, with some sectors offering strong fundamentals that support favorable loan terms and others facing significant headwinds that make refinancing more challenging. Understanding where your property fits within this landscape helps you identify the right lender, structure, and timing for your refinance.
Multifamily properties in San Francisco represent the strongest refinancing opportunity in the current market. The city's apartment vacancy rate dropped to 4.6% in Q4 2025, the lowest level since 2014, while average asking rents climbed to approximately $3,300 per unit. Annual rent growth reached 5.7% to 5.9%, the fastest pace in the nation, driven by AI-sector expansion, return-to-office trends, and population stabilization. Properties traded at an average price of roughly $529,000 per unit with cap rates near 4.5%. These fundamentals give lenders confidence in multifamily refinance underwriting, often resulting in the most competitive rates and highest leverage available.
Industrial and logistics properties continue to perform well in the San Francisco Bay Area, benefiting from constrained supply, strong demand from e-commerce and last-mile delivery operations, and the region's role as a major import gateway. Refinancing industrial properties typically commands rates at the lower end of the spectrum, with lenders offering favorable terms for well-located warehouse and distribution facilities.
Office properties present the most challenging refinancing environment in San Francisco. Despite a significant recovery in leasing activity, with total leasing volume reaching 9.38 million square feet in 2025 (a 41.3% year-over-year increase and the highest since 2019), the city's office vacancy rate remains elevated at approximately 33.5%. AI companies have been the primary driver of leasing activity, but the sector's concentration creates risk that lenders must evaluate carefully. Office property owners seeking to refinance should expect more conservative underwriting, lower leverage, and higher rates than other property types. Visit our commercial refinance programs page for detailed information on available options.
How Does the 2026 Maturity Wall Affect San Francisco Refinancing?
The commercial real estate maturity wall represents one of the most significant challenges facing San Francisco property owners in 2026. With $936 billion in CRE loans maturing nationally this year, and a substantial concentration in major gateway markets like San Francisco, the competition for refinancing capital is intense. Understanding the dynamics of this maturity wave helps borrowers prepare effective refinance strategies.
Many loans maturing in 2026 were originally written in 2021 and 2022, when rates were at historic lows and property valuations, particularly for office assets, were near their peaks. The combination of higher current rates, reduced property values in some sectors, and tighter lending standards means that many borrowers face a significant gap between their maturing loan balance and the proceeds available from a new loan. This gap, often called a "maturity default" risk, requires borrowers to bring additional equity to the table or negotiate with their existing lender for an extension or modification.
For San Francisco specifically, the maturity wall creates both challenges and opportunities. On the challenge side, the city's office sector has experienced the most significant value declines of any major property type, making office refinances particularly difficult. However, the AI-driven recovery in leasing activity provides a genuine improvement narrative that savvy borrowers can use to their advantage when negotiating with lenders.
On the opportunity side, the maturity pressure is creating situations where lenders are willing to offer more creative solutions to avoid taking properties back through foreclosure. These solutions include loan extensions with rate modifications, partial paydowns with improved terms, mezzanine financing to bridge equity gaps, and preferred equity injections from third-party capital providers.
Property owners with loans maturing in 2026 should begin their refinance process at least six to nine months before maturity. This timeline allows adequate time to prepare the property for underwriting, shop multiple lenders, negotiate terms, and close the new financing. Starting early also provides leverage in negotiations with the existing lender, as it demonstrates that the borrower has viable alternatives.
What Refinance Loan Programs Are Available in San Francisco?
San Francisco property owners have access to a diverse range of refinance programs, each designed for specific property profiles, borrower objectives, and market conditions. Selecting the right program can mean the difference between a smooth refinance with improved terms and a stressful process with suboptimal outcomes.
Conventional bank refinances remain the most cost-effective option for stabilized properties with strong cash flows. Banks and credit unions in San Francisco offer rates starting at 5.18% for the most creditworthy borrowers and lowest-risk properties, with loan-to-value ratios of 65% to 75% and terms of 5 to 10 years. These lenders prefer properties with strong occupancy, proven rent rolls, and experienced borrowers with local market knowledge.
CMBS (Commercial Mortgage-Backed Securities) loans provide non-recourse refinancing for larger commercial properties, typically $2 million and above. CMBS rates are generally competitive for stabilized properties, though the underwriting process is more rigid than bank financing. One advantage of CMBS for San Francisco borrowers is that these loans are non-recourse (no personal guarantee), which can be particularly valuable for owners of larger assets or those seeking to limit their personal exposure. However, CMBS loans include strict prepayment provisions and may require defeasance or yield maintenance for early repayment.
DSCR refinance loans are ideal for investors who want to qualify based on their property's cash flow rather than personal income. These programs are particularly popular for San Francisco multifamily refinances, where strong rental income and low vacancy support healthy debt service coverage ratios. DSCR lenders typically require a minimum coverage ratio of 1.20x to 1.25x, with rates ranging from 6.5% to 8.5% depending on leverage and property quality. Learn more at our DSCR programs page.
Cash-out refinance programs allow property owners to access built-up equity while securing a new mortgage. In San Francisco's multifamily market, where property values have strengthened significantly and rents are growing at nearly 6% annually, cash-out refinances can provide capital for additional investments, property improvements, or portfolio expansion. Lenders typically allow cash-out proceeds up to 70% to 75% of the appraised value, minus the existing loan balance.
Bridge refinance loans serve property owners whose assets are not yet stabilized enough to qualify for permanent financing. If your San Francisco property has occupancy issues, deferred maintenance, or below-market rents that you are in the process of addressing, a bridge refinance can provide the time and capital needed to execute your business plan before transitioning to permanent financing. Bridge refinance rates typically range from 7% to 11% with terms of 12 to 36 months. Explore bridge loan programs for more details.
SBA refinance programs offer compelling terms for owner-occupied commercial properties. The SBA 504 program allows refinancing of existing debt with up to 90% loan-to-value and below-market fixed rates on the CDC portion. For small business owners in San Francisco who own their commercial property, SBA refinancing can significantly reduce monthly payments and free up capital for business operations.
What Are the Key Factors That Determine Refinance Loan Terms?
Lenders evaluating commercial refinance applications in San Francisco assess several interconnected factors that collectively determine the rate, leverage, and terms available. Understanding these factors and how to optimize them helps borrowers secure the best possible refinance terms.
Property performance is the single most important factor. Lenders analyze the property's net operating income (NOI), occupancy rate, rent roll composition, and expense structure to determine its ability to support debt service. For San Francisco multifamily properties, the current market fundamentals are exceptionally strong: 4.6% vacancy, $3,300 average rents, and 5.7% to 5.9% rent growth. Properties that reflect these market conditions in their actual operating performance will qualify for the most favorable terms.
Debt Service Coverage Ratio (DSCR) is the primary metric lenders use to size refinance loans. Most San Francisco commercial lenders require a minimum DSCR of 1.20x to 1.30x, meaning the property's NOI must exceed annual debt service by at least 20% to 30%. Properties with DSCRs above 1.40x may qualify for reduced rates or higher leverage. Use our DSCR calculator to determine your property's coverage ratio and estimate your maximum refinance proceeds.
Loan-to-Value (LTV) represents the relationship between the loan amount and the property's appraised value. For commercial refinances in San Francisco, maximum LTV ratios typically range from 65% to 75% for permanent loans and up to 80% for bridge refinances. Properties that have appreciated since the original loan was made may qualify for higher proceeds, while those that have declined in value may face a shortfall. The property appraisal is a critical step in the refinance process, and working with an appraiser experienced in San Francisco commercial real estate can make a significant difference in the outcome.
Borrower strength, including credit history, net worth, liquidity, and commercial real estate experience, influences both the rate and the available loan programs. Many San Francisco lenders also evaluate the borrower's overall portfolio and track record managing similar properties in the local market.
How Can San Francisco Property Owners Maximize Refinance Value?
Strategic preparation before initiating a refinance can significantly improve the terms available and the proceeds generated. San Francisco property owners who invest time in optimizing their properties and loan packages before approaching lenders consistently achieve better outcomes than those who simply submit an application based on current conditions.
Stabilize occupancy before refinancing. For multifamily properties, this means addressing any vacant units, completing turn renovations, and ensuring all units are leased at market rates. For commercial properties, securing lease renewals or new tenants with strong credit profiles can materially improve the lender's underwriting. Given San Francisco's 4.6% multifamily vacancy rate and accelerating rent growth, the current market environment is exceptionally favorable for lease-up efforts.
Address deferred maintenance and capital improvements. Lenders in San Francisco pay close attention to property condition, particularly regarding seismic compliance, building systems, and curb appeal. Completing necessary repairs before the appraisal can increase the property's value and demonstrate to lenders that the asset is well-maintained. For properties requiring seismic retrofits, having a completed retrofit or a credible plan with cost estimates can prevent lender concerns from derailing the refinance process.
Prepare a comprehensive loan package that includes current rent rolls, trailing 12-month operating statements, tax returns, a property condition assessment, and a market analysis supporting your property's value. San Francisco lenders appreciate borrowers who present organized, professional packages that demonstrate market knowledge and operational competence.
Shop multiple lenders and loan products. The refinancing market in 2026 is competitive, with banks, credit unions, CMBS lenders, life insurance companies, debt funds, and agency lenders all active in San Francisco. Different lenders offer different advantages: banks may offer relationship pricing, CMBS provides non-recourse structures, and agency lenders (Fannie Mae, Freddie Mac) offer the most favorable multifamily terms. Getting quotes from at least three to five lenders ensures you are accessing the best available terms.
Consider the total cost of the refinance, not just the interest rate. Closing costs, prepayment penalties on your existing loan, appraisal fees, legal expenses, and any required escrows or reserves all affect the economic outcome. A slightly higher rate with lower fees and more favorable prepayment terms may ultimately provide better economics over the life of the loan. Use our commercial mortgage calculator to compare different scenarios.
What Role Does the AI Boom Play in San Francisco Refinancing?
The artificial intelligence industry's explosive growth in San Francisco has created a powerful refinancing tailwind that is reshaping lender sentiment toward the city's commercial real estate market. Understanding how to leverage this trend in refinance negotiations can help property owners secure more favorable terms.
AI companies leased over 6 million square feet of office space in San Francisco through 2025, with total office leasing volume reaching 9.38 million square feet for the year, a 41.3% increase over 2024 and the highest volume since 2019. This leasing activity, concentrated in SoMa, the Financial District, and Mission Bay, has fundamentally altered the narrative around San Francisco's office market. Major AI companies including OpenAI, Anthropic, xAI, and numerous smaller firms have established or expanded their San Francisco operations, bringing high-income employees who also drive demand for housing, retail, and services.
For multifamily property owners, the AI boom translates directly to stronger rental demand and rent growth. San Francisco's apartment vacancy rate at 4.6% and annual rent growth of 5.7% to 5.9%, the fastest in the nation, are driven in significant part by AI-sector employment growth. Properties in neighborhoods adjacent to major AI offices benefit most, but the effect ripples across the entire city. When refinancing multifamily properties, borrowers can cite AI-driven demand as a supportive factor in rent growth projections, which influences how lenders underwrite future income and property value.
For office property owners, the AI boom provides a recovery narrative that, while not yet fully reflected in valuations, gives lenders a basis for more optimistic underwriting assumptions. Properties in submarkets with the strongest AI tenant demand, such as SoMa, South Financial District, and Mission Bay, are seeing the most favorable refinance terms. Office properties with existing AI tenants or strong positioning for AI-company leasing can leverage this demand to support higher valuations and better loan terms.
The ripple effects of the AI boom extend to retail and mixed-use properties as well. Neighborhoods with growing AI-sector employment are seeing increased foot traffic, new restaurant and retail openings, and rising consumer spending. This dynamic supports refinancing for ground-floor commercial spaces and mixed-use buildings in AI-adjacent neighborhoods.
Frequently Asked Questions About Commercial Refinancing in San Francisco
When should I start the refinance process for my San Francisco commercial property?
Begin the refinance process six to nine months before your current loan matures. This timeline allows adequate time to prepare your property and financial documentation, obtain appraisals, shop multiple lenders, negotiate terms, and close the new loan. Starting early is particularly important in the current environment, where the $936 billion maturity wall means lenders are processing high volumes of refinance requests. Early preparation also gives you leverage when negotiating with your existing lender, as you can demonstrate that you have alternative financing options. If your property needs improvements to maximize refinance value, starting 12 months ahead provides time to complete those enhancements before the appraisal.
Can I do a cash-out refinance on my San Francisco property?
Yes, cash-out refinancing is available for San Francisco commercial properties, provided the property's value and cash flow support the higher loan amount. Most lenders allow cash-out proceeds up to 70% to 75% of the appraised value, minus the existing loan balance. In San Francisco's multifamily market, where property values have increased and rents are growing at nearly 6% annually, many property owners have significant equity available for cash-out. The proceeds can be used for additional property acquisitions, capital improvements, portfolio diversification, or any other purpose. Contact our team at /contact to discuss your cash-out refinance options.
What happens if my property value has declined and I cannot refinance the full loan balance?
If your property has experienced a value decline, you may face a gap between your maturing loan balance and the maximum proceeds available from a new loan. Several strategies can address this situation: negotiate a loan extension with your current lender to buy time for recovery; bring additional equity to pay down the balance to a level the new lender will finance; obtain mezzanine financing or preferred equity to bridge the gap; or explore a partial recourse structure where you provide additional collateral or a personal guarantee to support higher proceeds. The maturity pressure affecting the entire market means many lenders are willing to work with borrowers on creative solutions rather than forcing a distressed outcome.
How do San Francisco's seismic requirements affect refinancing?
Seismic compliance is a significant factor in San Francisco commercial refinancing. Lenders require a property condition assessment that includes seismic evaluation, and properties with known seismic deficiencies may face higher insurance requirements, reduced loan proceeds, or lender-required retrofit plans. Buildings constructed before modern seismic codes were adopted face the most scrutiny. If your property has completed a seismic retrofit, this is a positive factor that can improve your refinance terms. If a retrofit is needed, having a detailed plan with cost estimates and timeline can help lenders get comfortable with financing the property. The upcoming Concrete Building Safety Program adds new requirements for non-ductile concrete buildings, which may affect refinancing timelines for affected properties.
What is the difference between a rate-and-term refinance and a cash-out refinance?
A rate-and-term refinance replaces your existing loan with a new loan at a different rate, term, or both, without extracting additional equity. The primary goals are to lower your interest rate, extend your loan term, switch from a variable to fixed rate, or avoid a balloon payment. A cash-out refinance replaces your existing loan with a larger loan, allowing you to receive the difference as cash proceeds. Cash-out refinances typically carry slightly higher rates (0.25% to 0.50% premium) and lower maximum LTV ratios than rate-and-term refinances. Both options are widely available in San Francisco from banks, CMBS lenders, and alternative lenders.
How do I determine the best refinance option for my San Francisco property?
The best refinance option depends on your property type, current loan terms, investment objectives, and timeline. Start by calculating your property's current value, net operating income, and debt service coverage ratio using our DSCR calculator and commercial mortgage calculator. Compare these metrics against minimum lender requirements for different loan programs. Consider whether you need a rate-and-term refinance to lower costs, a cash-out refinance to access equity, or a bridge refinance to buy time for property improvements. Finally, get quotes from multiple lenders representing different capital sources (banks, CMBS, agencies, debt funds) to ensure you are seeing the full range of available terms. Explore our San Francisco commercial loans overview for a complete guide to financing options in the city.