Key Takeaways
- Lender appetite, loan to value ratio (LVR), pricing, and terms all change depending on whether you are buying a shop, office, warehouse, or factory.
- Office and warehouse properties in metropolitan areas usually attract the strongest lender appetite and the sharpest pricing; specialised retail and factory premises often face tighter LVRs and narrower lender pools.
- Lease quality, tenant strength, and the property’s adaptability to alternative uses are the main risk factors lenders weigh against each asset class.
- Matching the property type to the right lender (and understanding the trade-offs upfront) usually produces a smoother application and better terms than applying broadly across the market.
Why Property Type Changes the Lending Conversation
Commercial property is often discussed as a single category, but lenders treat each asset class very differently. The maximum LVR available on an inner-city office can be 10% to 15% higher than on a regional factory of similar value. Pricing can vary by 0.5% to 1.5% across property types for the same borrower. The lender pool willing to consider a deal can shrink from twenty active lenders for a standard office to a handful for specialised retail or industrial property.
The other reason property type matters is that the risk factors driving lender views are different from one asset class to the next. A shop is exposed to consumer foot traffic and retail trends; an office is exposed to white-collar employment dynamics; a warehouse benefits from e-commerce growth but carries location risk; a factory often has operational dependencies tied to specific industries. Hence, borrowers who understand how each lender evaluates these factors usually choose better lenders for their specific deal.
This guide compares how commercial lenders treat the four most common commercial property types: shops, offices, warehouses, and factories. If you want to work through which lenders fit your specific property type, our Loanworx commercial property loan specialists can identify the lenders most likely to price your deal sharply and approve it smoothly.
Shops and Retail Premises
Retail property covers everything from suburban shopfronts to large format retail and shopping centre tenancies. Lenders treat retail more cautiously than they did a decade ago because of shifts in consumer behaviour, online shopping, and the volatility of small business tenants.
Lender Appetite for Retail
Major banks and second-tier banks all lend on retail property, but appetite varies by sub-category. Strip retail in established suburbs with consistent foot traffic attracts good lender support. Stand-alone shops on secondary roads, or retail in declining centres, attract more conservative views. Shopping centre tenancies sit somewhere in between, depending on the centre’s anchor tenants and footfall.
Typical LVR and Pricing
Standard retail property typically attracts LVRs of 65% to 70%, with pricing usually 0.25% to 0.50% above prime office or industrial pricing. Specialised retail (such as bottle shops, takeaways with specific fit-outs, or convenience stores) often caps at 55% to 65% LVR with a wider pricing premium.
Key Risk Factors for Retail Lending
Tenant strength and lease term are the dominant risk factors. A 5-year lease to a national retailer (such as a major supermarket, pharmacy chain, or quick service restaurant) supports stronger lending. A 12-month lease to a small local operator attracts much tighter terms. Foot traffic, parking, visibility, and the surrounding retail mix all factor into lender views on the property’s underlying durability.
Practical Example
A $1.2 million strip retail property in a Melbourne suburb, leased to a national pharmacy on a 5-year lease at $84,000 net per year, would typically attract 70% LVR at competitive pricing. The same physical building leased to a small independent operator on a 12-month lease at the same rent would more likely attract 60% to 65% LVR with a pricing premium of 0.25% to 0.50%, reflecting the weaker lease covenant.
Office Properties
Office property has been through significant change post-COVID, with hybrid working patterns affecting demand for office space and the relative appeal of different office types. Lender appetite has adjusted but remains strong for the right office in the right location.
Lender Appetite for Offices
Quality metropolitan office space in CBDs and inner suburbs attracts the broadest lender appetite of any commercial property type. Major banks compete actively in this segment. Secondary office stock (older buildings, B-grade space, outer suburban locations) attracts more conservative views, particularly where leases are short or tenant covenant is weak. Suburban professional suites (medical, legal, accounting) often attract specialist lender interest.
Typical LVR and Pricing
Prime CBD office typically attracts 70% to 75% LVR with the sharpest commercial property pricing available. Suburban office sits in the 65% to 70% range. Older or secondary office stock can be capped at 60% to 65%, reflecting lender concerns about ongoing tenant demand for that grade of space.
Key Risk Factors for Office Lending
Tenant covenant, lease term, building quality, and location dominate lender thinking. Office buildings benefit from diversified tenant mixes, where the loss of one tenant does not crystallise vacancy across the whole building. Modern fit-out, current building services (HVAC, lifts), and current compliance certifications all support better lender views than older buildings with deferred maintenance.
Practical Example
A $2 million strata office in a Sydney CBD building, owner-occupied by an accounting practice with strong financials, would typically attract 70% to 75% LVR at competitive pricing. The same office held as investment, with a 3-year lease at market rent to a small marketing agency, might attract 65% to 70% LVR with slightly tighter pricing, reflecting the shorter lease term and the smaller tenant covenant.
Warehouse and Logistics Properties
Warehouse property has been one of the strongest performing commercial sectors in Australia, supported by e-commerce growth, supply chain reshaping, and increased demand for last-mile delivery space. Lender appetite has followed the underlying market strength.
Lender Appetite for Warehouses
Modern warehouse and logistics property in metropolitan industrial areas attracts very strong lender support, often comparable to prime office space. Major banks, second-tier banks, and specialist lenders all compete actively. Older industrial buildings, smaller suburban warehouses, and regional industrial property attract more measured views, although the underlying class is still well regarded.
Typical LVR and Pricing
Modern metropolitan warehouse typically attracts 65% to 75% LVR with pricing similar to prime office (sometimes sharper for very strong covenants). Older industrial buildings and suburban warehouses sit in the 60% to 70% range. Specialised industrial uses (such as cold storage or hazardous goods storage) attract narrower lender pools and tighter LVRs.
Key Risk Factors for Warehouse Lending
Location relative to transport infrastructure (highways, ports, airports), building specifications (clear height, loading docks, hardstand area, truck access), and tenant strength are the key drivers. Modern warehouses with good clear height, multiple dock doors, and large hardstand attract the strongest views. Older buildings with restricted access or low clear height face more measured lender treatment.
Practical Example
A $3 million warehouse in Melbourne’s western suburbs, leased to a national logistics operator on a 7-year lease at $240,000 net per year, would attract strong lender interest with 70% to 75% LVR available at sharp pricing. The same warehouse vacant, with no lease in place, would attract a meaningfully tighter LVR (often 60% to 65%) reflecting the lender’s view that the borrower’s wider position must cover the loan during any vacancy period.
Factory and Manufacturing Properties
Factory property differs from warehouse in that it is purpose-built for manufacturing activity, often with significant fixed plant and equipment integrated into the building. This creates both opportunities (high rental yields, long tenant tenure) and constraints (narrow alternative use, smaller resale pool).
Lender Appetite for Factories
Lender appetite for factory property is generally more cautious than for standard warehouses, reflecting the narrower alternative-use profile. Specialist commercial lenders and second-tier banks are often more active in this segment than major banks. The appetite depends heavily on whether the factory can be readily converted to general warehouse use (broader appeal) or is purpose-built for a specific industry (narrower appeal).
Typical LVR and Pricing
General-purpose factory buildings that can convert to warehouse use typically attract LVRs of 60% to 70%, with pricing 0.25% to 0.50% above standard warehouse pricing. Purpose-built factory premises with industry-specific fit-outs (such as food processing, chemicals, or heavy manufacturing) often cap at 55% to 65%, with wider pricing premiums.
Key Risk Factors for Factory Lending
The dominant risk factor is the building’s adaptability to alternative uses. A factory that can readily convert to general warehouse use is treated favourably; a factory with significant fixed plant integrated into the building is treated more cautiously because losing the existing tenant could require substantial reconfiguration costs. Owner-occupier factories where the same business operates from the premises long-term often present a stronger story than investor-owned factory premises.
Practical Example
A $2.5 million general-purpose factory in Brisbane’s industrial belt, owner-occupied by an established manufacturing business with one to two years of trading history, would typically attract 65% to 70% LVR at competitive pricing, supported by both the property and the business cash flow. The same factory as a pure investment, leased to a smaller manufacturer on a 3-year lease, would more likely sit at 60% to 65% LVR with tighter pricing, reflecting the higher concentration risk on a single tenant.
How the Asset Classes Compare
Drawing the four asset classes together highlights the patterns lenders apply. Three broad themes shape how each property type is treated.
Resale Pool Drives LVR
The depth of the resale market for a property type drives the LVR cap. Office and warehouse property have the broadest pools of potential buyers and tenants, supporting LVRs of 70% to 75%. Specialised retail and factory premises have narrower pools, with LVRs typically 5% to 10% lower. The principle is consistent: the more lenders believe a property can be resold quickly at a predictable price, the more they will lend against it.
Tenant Quality Drives Pricing
Across all four asset classes, tenant quality and lease term materially affect pricing. A strong tenant on a long lease lifts the deal into the lender’s preferred pricing tier; a weak tenant or short lease pushes it into a tighter pricing tier. This is true regardless of the underlying property type, although the effect is largest for retail and factory premises where alternative tenants may be harder to find.
Local Market Context Matters
Lender appetites also shift with local market conditions. Lenders see different occupancy rates, rental growth trends, and vacancy risks across the major Australian cities, which feeds directly into pricing and LVR for each property type. Our overview of how Melbourne lenders treat different property types covers the local lender landscape and how the practical experience of borrowing varies across asset classes in the Victorian market.
Specialist Lenders Fill the Gaps
Where major banks step back (specialised retail, purpose-built factories, smaller regional industrial property), specialist commercial lenders typically fill the gap, often at slightly higher pricing but with greater willingness to consider the deal. Knowing which lenders are active in each segment is half the battle in commercial property finance.
Practical Considerations for Buyers
Property type interacts with the broader financing decision in ways that buyers often underestimate. A few practical considerations help narrow the field.
Match the Property Type to Your Plan
Owner-occupier buyers are usually best served by property types matching their business operation and easy to occupy long-term. Investor buyers should consider the property’s appeal to a wide pool of future tenants, since vacancy and re-leasing risk affects long-term returns. The right property type depends partly on the buyer’s intended hold period and exit strategy.
Anticipate Lender Pool Width
For property types attracting broad lender support (office and warehouse), buyers usually have multiple competitive options. For narrower segments (specialised retail and purpose-built factories), the buyer needs to focus on lenders with current appetite for that asset class. Asking ‘who is active in this segment right now?’ is the right question, more than ‘who has the lowest advertised rate?’.
Plan for Specialist Costs
Some property types carry specialist due diligence costs the buyer should anticipate. Environmental assessments are common for older industrial property, factory premises, or sites with previous industrial use. Structural reports for older retail buildings can reveal capital expenditure requirements. Building energy ratings and accessibility compliance affect office buildings in particular. Budgeting for these costs upfront avoids surprises.
Consider Tenant Diversification
For investor purchases, properties with diversified tenant mixes (multiple tenants of similar size) usually support stronger lender views than properties with single-tenant exposure. This applies most strongly to retail and office; warehouses and factories are often single-tenant by nature, in which case tenant strength matters more than diversification.
Where to Read About Property Type Classifications
Beyond the lender-specific view of each property type, the broader Australian classification of commercial and industrial buildings is set out by the Australian Bureau of Statistics (ABS). The ABS classification provides a useful framework for thinking about how property types are defined and grouped, which influences how lenders, valuers, and tax authorities treat each category.
The ABS’s Australian classification of commercial and industrial buildings at abs.gov.au sets out how commercial and industrial buildings are categorised in Australia, including the distinctions between retail premises, office buildings, warehouses, factories, and specialised commercial uses.
Frequently Asked Questions (FAQs)
1. Which commercial property type attracts the highest LVR?
Prime metropolitan office and modern warehouse property typically attract the highest LVRs, often 70% to 75%. These segments have the broadest lender pools and the most active competition, which translates into the most generous LVR caps and the sharpest pricing. Specialised retail, purpose-built factories, and regional industrial property typically cap lower.
2. Are factory loans harder to get than warehouse loans?
Generally yes. Factory property attracts more cautious lender views because of its narrower alternative-use profile. Specialised manufacturing premises with significant fixed plant integrated into the building face particularly tight LVRs and a narrower lender pool. General-purpose factories that can convert to warehouse use are treated more favourably and sit closer to standard warehouse terms.
3. Do retail tenants affect my loan terms more than office tenants?
Tenant quality matters for both, but retail tenants are typically scrutinised more closely. Retail businesses face higher operational volatility than most office tenants, and the consequences of tenant failure can be more disruptive for the landlord (vacant retail space can take longer to re-lease in some markets). National retail tenants on long leases are treated favourably; small local operators on short leases attract tighter terms.
4. Can I get a commercial property loan on mixed-use property?
Yes. Mixed-use property (such as a shop with residential apartments above) is typically classified as commercial because of the commercial component. LVRs sit in the standard commercial range of 65% to 75%, although some lenders take a stricter view when the residential portion dominates the income. The lease arrangements on the commercial component and the residential component are both assessed.
5. Are interest rates the same across different commercial property types?
No. Rate variation across property types can be 0.25% to 1.50% even with identical borrowers and loan amounts. Prime office and modern warehouse typically attract the sharpest pricing; specialised retail and factory premises usually carry meaningful margins. The variation reflects the lender’s view of resale liquidity, tenant durability, and overall risk in each segment.
6. What property type is easiest to buy as an SMSF?
Self managed super fund (SMSF) commercial lending under a limited recourse borrowing arrangement (LRBA) is most commonly used for owner-occupier business premises (where the SMSF owns the property and the related business pays rent). Modern office, warehouse, and standard commercial premises with stable tenant arrangements typically suit this structure well. Specialised retail, factory, or hospitality premises are usually less straightforward in an SMSF context.
7. Should I buy an office building or a warehouse for investment?
Neither is universally better; it depends on the borrower’s goals and the specific opportunity. Warehouse property has performed strongly recently on the back of e-commerce and logistics growth, often delivering higher rental yields than office. Office property historically delivers steadier income with longer leases to established tenants. Modern office and modern warehouse both attract strong lender support, so financing usually does not determine the choice; investment fundamentals do.
The Bottom Line
Lender treatment of commercial property varies meaningfully by asset class. Office and warehouse property in metropolitan areas attract the broadest lender support, the highest LVRs, and the sharpest pricing. Specialised retail and purpose-built factory premises attract narrower lender pools, tighter LVRs, and pricing premiums to reflect their less liquid resale markets. Within each category, tenant quality and lease term shape the practical outcome more than the headline asset class.
For most buyers, the smartest move is to map the lender market for the specific property type before lodging an application. A lender well-suited to retail may have limited appetite for factory premises; a lender comfortable with warehouses may take a conservative view on specialised retail. Working with a specialist broker who knows which lenders are active in each segment usually produces sharper pricing, faster approvals, and a better structural outcome than approaching the market generically.
