For retail and office buildings, the lender is really underwriting the leases. The income that repays the loan is a stack of contracts with expiry dates, and underwriting for both classes in 2026 is organised around one measure — WALT, the weighted average lease term — plus how much rent expires in any single year. Retail and office underwrite differently, so this page keeps them in separate sections with separate numbers throughout. The office figures are a dated 2026 snapshot of a selective market: lender sources describe general multi-tenant office as the most challenging commercial segment this year, and the page reports that behaviour rather than smoothing it over.
General information, not financial advice.
WALT is the average remaining lease term across a building, weighted by rent — a tenant paying $200,000 a year with six years left counts for more than one paying $20,000 with two years left. Lenders care for a concrete reason: they compare WALT to the loan term. Rent from leases that expire before the loan matures is discounted or reserved against, because that income may not survive to the balloon; as a working rule, WALT generally needs to exceed the loan term for the income to be fully credited (peersense’s bridge-to-perm analysis; yieldstack’s rollover analysis). A 7-year loan against a building with a 3-year WALT is, in the lender’s model, partly a bet on re-leasing — and it gets sized and priced as one.
There is no universal WALT target, because normal lease length differs by class. The OCC’s commercial real estate lending booklet sets out the norms lenders judge against: office leases typically run 3, 5 or 7 years; retail leases 5–10 years; anchor tenants sign 20–25 years plus options. A 4-year WALT is weak for an anchored retail centre and unremarkable for an office building.
Alongside WALT sits the rollover limit: lenders prefer no single year to carry more than roughly 20–30% of rent in expirations (1stnwm’s retail page caps it at ≤30% in any year; truebluelending describes ladder-distributed maturities with no year over ~20–25%). A building where half the rent expires in year three has a refinancing problem built into its rent roll, and lenders price that concentration before they price anything else. Practical consequence for buyers: a rent roll is a diligence document, not a brochure. Before you price an offer on a tenanted building, build the expiry ladder year by year — the lender will, and the WALT and rollover numbers it produces will shape the loan you are offered more than the asking price does.
| Item | Multi-tenant retail | Credit-tenant NNN |
|---|---|---|
| Minimum DSCR | 1.25× | 1.20× |
| Typical LTV | 70–75% band | Upper end of the band |
| WALT preferred | 3+ years | Long — the lease is the credit |
(1stnwm retail underwriting page; fundeddeal retail LTV band.) The split inside the table is the retail story. A multi-tenant strip is underwritten on the rent roll as a whole, at the 1.25× bar. A single-tenant property leased long-term to a credit-rated tenant is underwritten substantially on that tenant’s covenant, which is why it clears at 1.20× — the lease functions like a bond. Anchored centres earn better terms than unanchored strips for the same reason: the anchor’s long lease (those 20–25 year terms) stabilises the rent roll around it. What hurts a retail application is rollover bunching and short WALT relative to the class norm — not short leases as such, since 5–10 year terms are the class standard.
| Item | Class A / medical office | Class B suburban office |
|---|---|---|
| CMBS DSCR requirement | 1.35–1.40× | 1.40–1.45× |
| Typical LTV | 55–65% | Lower end of the range |
| Debt-yield floor | ~10–12%+ | ~10–12%+ |
| Other gates | 85% occupancy floor, WALT 3+ years (1stnwm); sized TI/LC reserves | Tighter on all of the above |
(First Realty Capital office underwriting figures; bancaverse office underwriting guide.) These bars sit well above every other property class — compare industrial at 1.20–1.35×. Lender-channel colour, attributed as such: banks have largely paused on legacy office, life companies write only top assets, and CMBS is selective (truebluelending’s 2026 channel summary). That is behaviour to plan around, not a verdict on every office building: medical office and top-tier Class A still clear, at the tighter numbers above. If your deal is owner-occupied rather than tenanted, this is the wrong framework entirely — owner-occupiers go the owner-occupied and SBA route instead.
One office-specific cost sits inside the loan rather than at closing: TI/LC reserves. Lenders reserve for tenant improvements and leasing commissions because re-letting office space costs real money at every rollover, and the reserve is sized into the loan. These reserves are not closing costs — the distinction, and where each belongs in your budget, is drawn in commercial real estate closing costs.
WALT and rollover adjust the income; the coverage math itself — NOI, DSCR, debt yield — is worked in how commercial lenders evaluate your loan. And note the interaction with loan structure: a short WALT against a long term doesn’t just weaken the application, it concentrates risk at the balloon, which is the mechanics covered in commercial mortgage terms and balloons.
What is WALT, and why do lenders care about it? WALT is the rent-weighted average of the remaining terms on a building’s leases. Lenders compare it with the loan term because rent from leases expiring before maturity may not be there to repay the loan — that income is discounted or reserved against, and WALT generally needs to exceed the loan term for income to be fully credited.
How long do leases need to be for an office building loan? There is no single minimum, but the working gates lenders publish are a WALT of 3+ years and at least 85% occupancy, judged against the class norm of 3, 5 or 7-year office leases. What matters more than any one lease is the comparison with the loan term and how much rent expires in a single year.
Are banks still lending on office buildings in 2026? Selectively. Lender sources describe banks as largely paused on legacy general office, life companies writing only top assets, and CMBS active at higher bars — DSCR of 1.35–1.45×, LTV of 55–65%, debt-yield floors around 10–12%+. Medical office and strong Class A deals still get financed; weak suburban multi-tenant deals face the tightest market in commercial lending.
Sources: peersense bridge-to-perm analysis and yieldstack rollover analysis (WALT framework); OCC Commercial Real Estate Lending booklet (class lease-term norms, via yieldstack); First Realty Capital office underwriting guide (CMBS DSCR bars); bancaverse office underwriting guide (LTV, debt yield, TI/LC reserves); 1stnwm retail and office pages (DSCR splits, rollover cap, occupancy floor); truebluelending 2026 channel summary and rollover guidance; fundeddeal retail LTV band. Figures are attributed published snapshots of a selective 2026 market; individual deals vary. Currency verified 2026-10-23.