For years, commercial real estate loans — especially for office and light industrial properties — came with a hefty premium over residential mortgages. If you wanted to finance an office building or warehouse, you could expect to pay interest rates at least 2% higher than what homeowners were getting on 30-year fixed loans.

Not anymore.

Today, that gap has narrowed dramatically. In fact, the cost of financing a commercial property is now roughly on par with a standard home loan. With lenders offering office and light industrial loans at around 6.70% for up to 75% LTV (according to CommLoan’s latest February 2025 data), we’re seeing a level of affordability in commercial real estate that hasn’t been available in decades.

A Historic Shift in Commercial Real Estate Loans Pricing

To put this in perspective, let’s look back 20 years. In the early 2000s, a commercial property loan often came with an interest rate between 8–9%, while residential mortgage rates hovered much lower. Even as recently as the mid-2010s, the spread remained significant — if homebuyers were getting 4% loans, commercial borrowers were looking at 6% or higher.

Now? The difference is within 50 to 100 basis points. In some cases, commercial borrowers are locking in rates that are nearly identical to what homeowners are paying for a 30-year mortgage.

What’s driving this shift? A few key factors:

1. Increased Lender Competition

Lenders are aggressively competing for high-quality, income-producing commercial assets. With the residential mortgage market cooling due to affordability challenges and stagnant home sales, many lenders are shifting focus to commercial real estate — especially sectors like office and light industrial that generate steady cash flow. This has tightened the interest rate spread between commercial and residential loans.

2. Stronger Underwriting & Economic Stability

Despite economic uncertainty, underwriting standards for commercial properties have improved significantly over the past decade. Lenders are more confident in pricing loans competitively because they have better data, better risk models, and more experience navigating market fluctuations. As a result, interest rates on commercial loans have aligned more closely with residential mortgages.

3. The Refinancing Boom (and Squeeze)

A massive wave of commercial real estate loans is maturing, meaning property owners need to refinance at today’s rates. In many cases, borrowers who previously locked in ultra-low rates during the 2020–2021 period now face higher borrowing costs. But rather than pricing commercial loans far above residential mortgages, lenders are keeping rates in check to encourage refinancing activity and maintain deal flow.

What This Means for Investors and Small Businesses

For those looking at commercial real estate, this shift in financing costs is especially good news for micro-flex industrial spaces — a sector that continues to see strong demand from small businesses, e-commerce operators, and investors seeking scalable, income-producing assets. There’s kinda never been a better time to finance a Personal Warehouse because the cost gap between a home loan and commercial real estate loans has effectively disappeared. While interest rates overall are higher than they were a few years ago, the relative affordability of commercial financing presents a unique opportunity. If rates remain steady (or even decline slightly), investors who secure favorable financing now could be well-positioned for long-term appreciation and rental income (or equity) growth.

Traditionally, financing a small industrial unit meant paying significantly higher rates than a residential mortgage. But with today’s loan rates nearly on par, securing a Personal Warehouse unit has never been more accessible. These spaces offer the best of both worlds: an asset that appreciates like real estate, generates rental income (or builds equity), and provides operational flexibility… all while benefiting from financing costs that are now more competitive than ever.

If you’ve been considering ownership, this is the moment to take advantage of the new lending environment. With rates at historic lows for the commercial sector, locking in a micro-flex industrial space now could set you up for long-term strength and success.

Final Thoughts

For decades, commercial real estate loans were an entirely different financial animal compared to home mortgages. But today’s lending environment has changed dramatically.

With lenders competing harder for business, underwriting practices improving, and refinancing pressures mounting, the commercial real estate financing landscape has shifted in favor of investors and/or business owners. If you’ve been sitting on the sidelines waiting for the right time to buy or refinance, this might be the moment to make a move.

Want to explore your options? Personal Warehouse wrote the book on micro-flex industrial spaces, and we’ve been helping our clients and partners secure commercial real estate loans for decades. Reach out today to see how you can take advantage of this historic shift in commercial lending.