Seattle Commercial Refinance Loans: Maturity Wall & Rate Strategies [2026 Guide]

Seattle commercial property owners are navigating a refinancing landscape shaped by forces both national and uniquely Pacific Northwestern. The 2026 maturity wall is sending roughly $936 billion in commercial mortgages to their due dates nationally, a 19% increase over 2025's revised estimates, and Seattle carries a significant share of that maturing debt. Downtown office vacancy has climbed to 35.6% as of Q4 2025, creating acute refinancing pressure for office property owners. Yet Washington state's absence of personal income tax, the city's thriving tech economy, and aggressive new office-to-residential conversion incentives create opportunities that do not exist in most other major metros.

This guide covers the full spectrum of refinance strategies for Seattle commercial property owners: rate-and-term refinancing, cash-out programs, bridge-to-permanent transitions, maturity extensions, office conversion financing, and sector-specific strategies for multifamily, industrial, and office assets. For a broader overview of national programs, visit our commercial refinance loans page.

Why Is the 2025-2026 Maturity Wall Creating Urgency for Seattle Borrowers?

The 2025-2026 maturity wall represents the largest concentration of commercial mortgage maturities in U.S. history. Nearly $1 trillion in loans matured in 2025, and another $936 billion is scheduled for 2026. Seattle sits at a particularly acute pressure point because the city's commercial lending boom from 2020 to 2022 coincided with historically low interest rates, pandemic-era tech expansion, and peak office demand. Those 3-year and 5-year term loans are now reaching their due dates in a fundamentally different rate environment.

Borrowers who locked in rates between 3.0% and 4.0% during the pandemic-era lending surge now face a market where Washington state commercial mortgage rates start at 5.18% for the strongest credits and can exceed 7.5% depending on property type and leverage. The math is punishing. 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 in debt service that directly compresses cash flow and threatens debt service coverage ratios.

Seattle's maturing debt is concentrated across property types that each face distinct challenges. Office properties financed during the 2021-2022 tech hiring surge are maturing into a market where downtown vacancy has ballooned to 35.6%. Multifamily loans originated during the pandemic rental boom are coming due after years of significant new construction across Capitol Hill, South Lake Union, and the Eastside. Industrial properties in the Kent Valley and along the port corridor are maturing in a sector that, unlike office, benefits from strong fundamentals driven by e-commerce and port activity.

CMBS is expected to play a central role in refinancing activity in 2026, with strong issuance driven by the maturity and refinancing of peak-year loans originated in 2021 and 2022. For well-capitalized borrowers, the maturity wall is not just a challenge but also a source of acquisition opportunities that emerge when overleveraged competitors cannot refinance.

What Are Current Commercial Refinance Rates in Seattle?

As of early 2026, Washington state 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 Seattle market.

Here is how rates currently break down by loan type for Seattle 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 Seattle 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

Seattle borrowers benefit from Washington state's absence of personal income tax, strong lender competition in the Puget Sound corridor, and a deep pool of regional banks, credit unions, and national lenders. Major lenders like HomeStreet Bank, Washington Federal, Columbia Bank, and Banner Bank compete alongside national CMBS shops and agency lenders. Estimate your monthly payments using our commercial mortgage calculator to run scenarios across different rate levels and loan terms.

How Is Seattle's Office Market Affecting Refinance Options?

Seattle's office market tells one of the most challenging refinancing stories among major U.S. metros. The overall office vacancy across the Puget Sound region reached 27.6% by the end of 2025, up from 27.3% the previous quarter. But the downtown Seattle story is far more acute: overall vacancy in the Downtown Seattle office market hit 35.6% in the fourth quarter of 2025, up 330 basis points from the 32.3% reported at the end of 2024.

The regional vacancy rate is projected to peak at 18.3% in 2026, with about 43 million square feet listed for sale or lease. Investment activity for transactions exceeding $1 million continued at a steady pace in 2025, with 164 transactions totaling $1.58 billion and an average price of $364 per square foot, compared to $1.63 billion across 150 transactions in 2024. The sale price for office space averaged $302.01 per square foot.

For office property owners seeking to refinance, lenders are applying intense scrutiny to tenant rosters and submarket location. Buildings in South Lake Union with tech tenancy from Amazon, Meta, or Google are faring differently than older Class B and C buildings in Pioneer Square or the International District. The bifurcation is sharp: Class A properties in prime tech corridors can still attract competitive financing, while older office stock faces LTV caps of 50-60% and rate premiums of 150-250 basis points above what multifamily or industrial properties command.

Despite the macro headwinds, there are encouraging signals. The Puget Sound office market finished 2025 with signs of stabilization following several years of volatility, with vacancy rates remaining elevated but beginning to level off as the rate of increase has slowed. Investment volume is expected to gain further momentum in 2026. For owners of office properties, this suggests that the worst may be stabilizing, though a full recovery remains years away.

What Office-to-Residential Conversion Financing Is Available in Seattle?

Seattle has emerged as one of the most proactive cities in the country for encouraging office-to-residential conversions, creating a unique refinancing and redevelopment opportunity that does not exist in most other markets. In February 2025, the Seattle City Council passed Council Bill 120937, adopting a sales tax exemption specifically designed to encourage developers and commercial property owners to convert underutilized commercial properties into residential housing.

The primary incentive is the deferral of the 10.3% sales and use taxes on construction costs for eligible conversion projects. For a $20 million conversion project, this represents over $2 million in deferred costs, a significant reduction in upfront capital requirements that directly improves project feasibility and refinancing economics.

The Office of Planning and Community Development estimates that these incentives will produce 1,000 to 2,000 housing units over a 7-year time frame, including 100 to 200 affordable units. When combined with the city's Multifamily Tax Exemption (MFTE) program, OPCD estimates the policy could encourage 3,000 to 6,000 units, including 300 to 600 affordable units.

The first post-pandemic office-to-multifamily conversion project is already underway. Stream Real Estate purchased Queen Anne Plaza, a $7 million office building, with plans to convert it into apartments. This transaction demonstrates the viability of the conversion model in Seattle and signals to lenders that a pipeline of similar deals is forming.

For commercial property owners with underperforming office assets, conversion financing provides a path that pure office refinancing cannot. Bridge lenders and construction lenders are beginning to underwrite conversion projects in Seattle based on the completed residential value rather than current office income. Typical conversion financing structures include:

• Bridge-to-construction loans: 12-36 month terms at 8.0% to 11.0%, sized to 65-75% of completed value
• C-PACE financing: Long-term (up to 30 years) financing for energy-efficient conversion improvements, repaid through property tax assessments
• MFTE-eligible permanent financing: Agency or bank loans for completed conversions with affordable housing components

If your office property is a candidate for conversion, consider using a bridge loan to acquire or reposition the asset before placing permanent financing on the completed residential product.

How Does Washington's No State Income Tax Benefit Commercial Refinancing?

Washington state's absence of personal income tax creates structural advantages for commercial real estate refinancing that set Seattle apart from competitors like San Francisco, Los Angeles, and New York. These advantages affect both the economics of holding and refinancing commercial property and the after-tax returns on cash-out proceeds.

Rental income from commercial real estate is not subject to Washington state business and occupation (B&O) tax or retail sales tax. This means that the net operating income supporting your refinance is not reduced by state-level income taxes, improving debt service coverage ratios compared to identical properties in states with income taxes. A property generating $1 million in NOI in Seattle retains the full $1 million for debt service calculations. The same property in California would lose 9-13% to state income taxes before debt service, a meaningful difference when lenders are evaluating DSCR at refinancing.

Washington also does not tax capital gains from the sale of real estate, which is relevant for borrowers considering whether to refinance and hold or sell. In California, capital gains face a 13.3% state tax. In New York, combined state and city taxes can reach 12.7%. In Washington, the tax is zero on real estate gains, making the hold-and-refinance strategy comparatively more attractive because selling does not generate a large state tax savings relative to refinancing.

However, borrowers should be aware of two Washington-specific costs. The Real Estate Excise Tax (REET) ranges from 1.1% to 3.0% on property sales, which is relevant if you choose to sell rather than refinance. And Washington state property taxes, while not as high as Texas, still represent a meaningful operating expense that lenders factor into underwriting.

For investors comparing markets, the no-income-tax advantage directly translates to higher cash-on-cash returns after refinancing. An investor extracting $2 million in cash-out equity in Seattle faces no state income tax on the future income generated by deploying that capital. The same investor in California would need to generate 10-13% more gross income to achieve the same after-tax return. Learn more about our refinance programs and how Washington's tax structure enhances returns.

What Multifamily Refinance Opportunities Exist in Seattle?

Seattle's multifamily market presents the strongest refinancing story among the city's major property types. Strong population growth, constrained land supply, and favorable regulatory trends support property values and lender appetite for multifamily collateral in the Puget Sound region.

Seattle delivered 7.9% annualized multifamily returns in Q3 2025, making it one of the top-performing multifamily markets in the country. Cap rates on Class A multifamily properties held at 4.74%, while Class B assets compressed to 4.92%, down 7 basis points. Class C multifamily averaged 5.38%, down 4 basis points. This cap rate compression signals growing investor demand and supports higher property valuations for refinancing purposes.

Multifamily cap rates are expected to fall further in 2026 as strong fundamentals drive returns and investment demand continues to build. For multifamily owners refinancing in Seattle, the lending landscape is favorable compared to other property types:

• Agency (Fannie/Freddie): 5.25% to 5.75% with LTVs up to 80% and terms from 5 to 30 years
• HUD/FHA 223(f): 5.50% to 5.90% with fully amortizing terms up to 35 years (6-12 month timeline)
• Bank/Credit Union: 5.75% to 6.50% for local relationship borrowers
• CMBS: 5.50% to 6.25% for larger stabilized properties

Seattle's multifamily submarkets perform differently for refinancing purposes. Properties in Capitol Hill, South Lake Union, Ballard, and Fremont command premium valuations and the tightest cap rates. The Eastside markets of Bellevue, Kirkland, and Redmond benefit from Microsoft and tech employer proximity. Properties in Renton, Kent, and Federal Way trade at wider cap rates but offer higher yields and value-add refinancing potential.

For multifamily owners whose properties have strong occupancy but whose 2020-2022 vintage loans are maturing, the current window offers a chance to lock in permanent financing at rates that, while higher than the original loans, remain within a range that supports positive cash flow. Check whether your property's income supports the new debt service using our DSCR resources.

How Is Industrial Refinancing Performing in the Puget Sound Region?

Seattle's industrial sector, particularly properties in the Kent Valley, along the port corridor, and in the Eastside logistics network, represents the strongest refinancing opportunity in the local market. Vacancy remains tight, rent growth is positive, and institutional lender appetite for industrial collateral exceeds every other commercial property type.

The industrial market fundamentals are compelling. The average capitalization rate rose to 7.68% in Q1 2025, reflecting healthy investment activity with 3.02 million square feet changing hands. E-commerce fulfillment, port logistics, and cold storage drive demand across the Puget Sound industrial corridor. Amazon's continued expansion, the Port of Seattle and Port of Tacoma's joint operations through the Northwest Seaport Alliance, and the region's position as the closest major U.S. port to Asia all support sustained tenant demand.

Industrial refinancing in Seattle currently attracts rates 25-75 basis points below office properties of comparable quality. Life insurance companies and CMBS lenders are particularly active in the industrial sector, offering rates from 5.20% to 6.25% with LTVs up to 75%. Properties with long-term leases to credit tenants in logistics, cold storage, or e-commerce fulfillment can access even more favorable terms.

Investment sales are projected to rise by up to 10% in 2025-2026 as more capital flows into industrial and multifamily properties. Industrial remains Seattle's hottest commercial sector, driven by e-commerce and port activity. For industrial property owners with loans maturing from the 2020-2022 vintage, the case for refinancing into permanent financing is strong. Property values have generally appreciated, occupancy remains high, and lender competition for industrial deals keeps terms favorable.

If your industrial property needs interim financing before permanent placement, consider our bridge loan programs for a short-term solution.

What Is the Difference Between Rate-and-Term and Cash-Out Refinancing in Seattle?

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 Seattle, cash-out programs typically allow up to 75% LTV on most commercial property types. Fannie Mae and Freddie Mac multifamily programs can reach 75-80% LTV, and SBA 504 loans allow up to 20% of the appraised value for cash-out on eligible owner-occupied properties.

Seattle borrowers enjoy a significant structural advantage that owners in high-tax states like California and New York do not fully replicate: Washington has no personal income tax, and rental income is not subject to B&O tax. This means that cash-out proceeds deployed into new investments generate returns that are not reduced by state income taxes. Closing costs in Seattle typically run 1.0% to 2.5% of the loan amount, competitive with national averages and well below coastal markets with transfer taxes.

In the current Seattle market, sponsors are increasingly using cash-out refinances strategically. With billions in maturing debt creating distress among overleveraged office owners, well-capitalized borrowers are extracting equity from stabilized multifamily and industrial assets and deploying it to acquire distressed office properties at significant discounts for conversion or repositioning. This strategy is particularly active in the downtown core, where office properties trading at 40-60 cents on the dollar relative to 2019 valuations create compelling investment opportunities for buyers who can navigate the conversion incentive programs.

How Should Seattle Borrowers Prepare for a Commercial Refinance?

Successful refinancing requires preparation that starts 12-18 months before maturity. Here is a practical timeline for Seattle 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 office properties, document tenant creditworthiness and lease renewal probability. Assess whether office-to-residential conversion might be viable for underperforming assets.

12 months before maturity: Engage a commercial mortgage broker or begin direct lender outreach. Seattle's deep lender market means you should 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. Seattle properties typically require Phase I environmental assessments, seismic evaluations for older buildings (particularly in Pioneer Square and the International District), and updated surveys.

3 months before maturity: Finalize legal review, complete title work, and coordinate closing.

Seattle-specific closing costs to budget for:

• Title insurance: 0.25% to 0.50% of loan amount
• Appraisal and environmental: $4,000 to $20,000 depending on property size and complexity
• Legal fees: $10,000 to $30,000 for borrower's counsel
• Lender origination fee: 0.50% to 1.50% of loan amount
• Seismic evaluation: $3,000 to $10,000 for unreinforced masonry or pre-1990 buildings
• Phase I Environmental: $2,500 to $6,000
• Insurance reserves: 3-12 months of premiums escrowed at closing
• Recording fees: $500 to $2,000 (King County)

Budget 1.0% to 2.5% of the total loan amount for closing costs on a standard Seattle commercial refinance.

What Loan Programs Work Best for Different Seattle Property Types?

The ideal refinancing program depends on property type, condition, submarket location, and borrower objectives. Here is how different Seattle asset classes typically match to loan programs.

Multifamily (5+ units): Agency loans through Fannie Mae and Freddie Mac offer the most competitive rates and terms, with 5-30 year fixed-rate options and up to 80% LTV. Seattle's strong rental demand and population growth make multifamily the easiest asset class to refinance. HUD/FHA 223(f) provides 35-year terms at the lowest rates but involves a 6-12 month timeline.

Office: Seattle's most challenged asset class. Class A buildings in South Lake Union and the CBD with tech tenancy can still attract competitive financing. Class B and C buildings in Pioneer Square, the International District, and outlying submarkets face tighter conditions, with LTVs capped at 50-60% and rate premiums. Consider conversion feasibility before committing to an office refinance.

Industrial/Warehouse: The most favorable financing terms in the Seattle market. Low vacancy, strong rent growth, and port-driven demand attract competitive offers from life companies, CMBS, and banks. Properties in the Kent Valley, along the Duwamish corridor, and near the port command premium terms.

Retail: Grocery-anchored and necessity retail in high-traffic corridors like Aurora Avenue, Rainier Avenue, and University Village finance relatively well. Power centers and single-tenant retail require strong lease term remaining and tenant credit.

Medical Office/Life Sciences: Seattle's growing life science corridor, anchored by the Fred Hutchinson Cancer Center and UW Medicine, supports a robust medical office market. Medical office properties with healthcare system tenants access rates comparable to industrial.

For a complete look at Seattle commercial loan options across all property types, visit our Seattle commercial loans page.

Ready to refinance your Seattle 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 Seattle?

Most lenders require a minimum debt service coverage ratio (DSCR) of 1.20x to 1.25x for stabilized commercial properties in Seattle. Agency multifamily lenders may accept 1.15x to 1.20x for strong properties in high-demand submarkets like Capitol Hill, South Lake Union, or Bellevue. Office properties face stricter requirements, often 1.30x to 1.50x, reflecting higher vacancy risk. Industrial properties with long-term credit tenants may qualify at 1.20x. Washington state's no-income-tax advantage means that more of your NOI reaches the DSCR calculation compared to properties in states where income taxes reduce cash flow. You can evaluate your property's debt coverage using our DSCR resources.

How does Seattle's seismic risk affect commercial refinancing?

Seismic risk is a factor in Seattle commercial refinancing, particularly for unreinforced masonry buildings and pre-1990 construction in Pioneer Square, the International District, and other older neighborhoods. Lenders may require seismic evaluations (Probable Maximum Loss assessments) for buildings that have not been retrofitted. Properties with PML ratings above 20% may face higher insurance requirements or reduced LTV ratios. Seismically retrofitted buildings receive more favorable underwriting. Budget $3,000 to $10,000 for seismic evaluation and factor potential retrofit costs into your refinancing plan.

Can I refinance a Seattle office building with high vacancy?

Yes, but options narrow significantly above 25-30% vacancy. Conventional lenders typically want to see 80%+ occupancy and 1.25x+ DSCR. For higher-vacancy office properties, bridge lenders and debt funds offer transitional financing at 7.5% to 11.0% with 1-3 year terms while you execute a leasing or repositioning strategy. Seattle's new office-to-residential conversion incentives, including the 10.3% sales tax deferral, make conversion financing an increasingly viable alternative to pure office refinancing for properties in the downtown core.

How long does a commercial refinance take in Seattle?

Timelines vary by loan type. Bank loans typically close in 45-60 days. CMBS loans require 60-90 days. Agency loans (Fannie Mae/Freddie Mac) close in 45-75 days. HUD/FHA 223(f) loans take 6-12 months. Bridge loans from private lenders can close in 2-4 weeks for urgent situations. Seismic evaluation for older buildings may add 2-4 weeks. Environmental review for waterfront or industrial-adjacent properties may add additional time if a Phase II assessment is triggered.

What are the advantages of refinancing in Washington state versus selling?

Washington offers several structural advantages for refinancing over selling. There is no personal income tax on capital gains from real estate, which means sellers do not face the 9-13% state tax hit that California imposes. However, Washington does impose a Real Estate Excise Tax (REET) of 1.1% to 3.0% on property sales, which adds cost to the sell side. For cash-out refinancing, the absence of income taxes means extracted equity can be redeployed without state tax friction. Property taxes in King County average 0.9% to 1.1% of assessed value, below the national average and well below Texas rates, keeping holding costs manageable for refinance-and-hold strategies.

Is now a good time to refinance commercial property in Seattle?

For borrowers with loans maturing in 2026-2027, waiting carries risk. Rates have stabilized from their 2023 peaks but remain above historical norms, and the Federal Reserve's rate path is uncertain. The current window offers reasonable rates (5.18%+ for strong credits), active lender competition in the Puget Sound market, and sufficient liquidity for most property types except distressed office. Multifamily and industrial borrowers are in the strongest position. Office property owners should evaluate conversion feasibility alongside traditional refinancing. Contact our team to discuss timing specific to your property and loan situation.