Commercial development finance, priced off the yield.
Industrial and logistics, offices, retail, hotels, healthcare and student schemes from £500k to £100m. Commercial development runs on the same mechanics as residential and is underwritten on a fundamentally different basis, because the end value rests on income rather than sales.
By Dominic Whitecross, Co-Founder, HyLend. Last reviewed July 2026.
Three things that differ from residential
Valuation rests on yield, not comparables. A residential GDV is built from what similar units have sold for. A commercial GDV is built from the income the finished building will produce, capitalised at an assumed yield. A small movement in that yield assumption moves the end value considerably, and lenders stress it. A scheme that sits comfortably inside its LTGDV cap at one yield can breach it at another, which is why commercial appraisals need more headroom than residential ones.
The exit is usually a lease or an investment sale, not unit sales. Where a pre let is in place, the covenant strength of the tenant and the backing behind it become central to what any lender will offer, sometimes more so than the building itself. A strong covenant on a long lease can improve both leverage and pricing materially. A speculative scheme with no pre let is a different proposition and is priced as one.
Sector appetite moves. Industrial and logistics, healthcare, student accommodation, hotels, leisure and retail all attract different lender appetite at any given moment, and that appetite shifts with the cycle. The spread between the best and worst available terms is wider here than on a straightforward residential scheme, which makes testing the whole market worth more.
Pre let, speculative, and the middle ground
Pre let. The strongest position. An agreement for lease with a solid covenant gives the lender a defined income and a clear investment exit, and terms reflect that.
Speculative. Fundable, at lower leverage and higher pricing, with more weight on the sponsor and on the letting evidence in that market. The question a lender asks is what happens if the building sits empty for longer than the appraisal assumes.
Partial pre let. Common on multi unit industrial and the most negotiable position, because the anchor income underpins the facility while the balance carries letting risk.
What to have ready
The scheme and its consent position, the build cost with contingency, the assumed yield and where it comes from, any agreement for lease with the tenant's covenant, and the intended exit. If you plan to hold rather than sell, say so at the outset, because it changes how the facility should be structured and what the term facility will need to see later.
On the hold route, see commercial mortgages and extend, bridge or refinance.
On commercial schemes the yield decides the value
A completed commercial scheme is not valued on comparable sales but on income: the valuer assesses market rent, deducts operating costs and applies a yield. That makes pre lets and agreements for lease worth far more than presentational comfort — a signed occupier with a decent covenant and a reasonable term can move the completed valuation, and therefore your leverage, more than any construction saving.
Expect a vacant possession figure alongside it, and expect a cautious lender to look hard at that number where the scheme is speculative. 90 and 180 day valuations explained →
Timeline on a commercial development facility
Eight to twelve weeks is realistic, running slightly longer than residential. The completed value is assessed on income rather than on comparable sales, so where pre-lets or agreements for lease are part of the case, the lender will want to see the documents rather than the intention, and negotiating them is often the long pole.
Terms within 24 to 48 hours; the rest is valuation, monitoring surveyor and legals in parallel. The honest bridging timeline →
Commercial Development FAQs
How is commercial development finance different from residential?
The mechanics are the same but the valuation basis is not. Residential gross development value is built from comparable sales; commercial GDV is built from the income the finished building will produce, capitalised at an assumed yield. A small movement in that yield moves the end value considerably, so lenders stress it and commercial appraisals need more headroom. The exit is usually an investment sale or a term facility rather than unit sales, which makes tenant covenant strength central.
Can you fund a speculative commercial development?
Yes, at lower leverage and higher pricing than a pre let scheme, with more weight on the sponsor and on letting evidence in that specific market. The question a lender is really asking is what happens if the building sits empty longer than the appraisal assumes. A partial pre let, where anchor income underpins the facility while the balance carries letting risk, is the most negotiable middle position and common on multi unit industrial.
Does the tenant matter more than the building?
Frequently, yes. Where an agreement for lease is in place, the covenant strength of the tenant and the financial backing behind it feed directly into both leverage and pricing, and can matter more to a lender's decision than the specification of the building. A strong covenant on a long lease materially improves terms.