Washington state is known for its thriving economy, diverse industries, and growing population. As a result, the commercial real estate market in Washington is highly competitive, with a variety of financing options available for investors and developers. Whether you're looking to invest in multifamily properties, office buildings, industrial warehouses, retail spaces, self-storage facilities, or hospitality properties, there are a range of loan products and lenders to choose from.

In this article, we'll take a closer look at the economy and real estate markets in Washington, as well as the financing options available for each property type.

Economy in Review

Washington state has a strong and diverse economy, with major industries including aerospace, technology, healthcare, and agriculture. According to the Bureau of Labor Statistics, the state's unemployment rate was 5.4% as of August 2021, slightly higher than the national average of 5.2%. However, job growth has been steady in recent years, with the state adding over 100,000 jobs in 2019 alone.

The state's population has also been growing rapidly, with an estimated 7.8 million residents as of 2020. This has led to increased demand for housing and commercial real estate, particularly in urban areas like Seattle and Bellevue.

Multifamily Market

The multifamily market in Washington has been strong in recent years, with high demand for rental properties and low vacancy rates. According to data from the U.S. Census Bureau, the state's rental vacancy rate was just 4.3% in 2020, compared to the national average of 6.4%. This has led to increased competition among investors and developers looking to finance multifamily properties.

Financing options for multifamily properties in Washington include traditional bank loans, government-backed loans from the Federal Housing Administration (FHA) or Department of Housing and Urban Development (HUD), and private equity or mezzanine financing. Interest rates and terms will vary depending on the lender and the borrower's creditworthiness.

Office Market

The office market in Washington has been impacted by the COVID-19 pandemic, with many companies shifting to remote work and reducing their office space needs. However, there is still demand for high-quality office space in urban areas, particularly from tech companies and startups.

Financing options for office properties in Washington include traditional bank loans, commercial mortgage-backed securities (CMBS), and private equity or mezzanine financing. Interest rates and terms will depend on the lender and the borrower's creditworthiness, as well as the location and quality of the property.

Industrial Market

The industrial market in Washington has been strong in recent years, with high demand for warehouse and distribution space from e-commerce companies and logistics providers. According to data from CBRE, the state's industrial vacancy rate was just 3.6% in Q2 2021, compared to the national average of 5.6%.

Financing options for industrial properties in Washington include traditional bank loans, CMBS, and private equity or mezzanine financing. Interest rates and terms will depend on the lender and the borrower's creditworthiness, as well as the location and quality of the property.

Retail Market

The retail market in Washington has been impacted by the COVID-19 pandemic, with many retailers closing their doors or reducing their physical footprint. However, there is still demand for high-quality retail space in urban areas and popular shopping destinations.

Financing options for retail properties in Washington include traditional bank loans, CMBS, and private equity or mezzanine financing. Interest rates and terms will depend on the lender and the borrower's creditworthiness, as well as the location and quality of the property.

Self-Storage Market

The self-storage market in Washington has been growing in recent years, with high demand for storage space from homeowners, renters, and businesses. According to data from Yardi Matrix, the state's self-storage occupancy rate was 91.4% in August 2021, compared to the national average of 89.5%.

Financing options for self-storage properties in Washington include traditional bank loans, CMBS, and private equity or mezzanine financing. Interest rates and terms will depend on the lender and the borrower's creditworthiness, as well as the location and quality of the property.

Hospitality Market

The hospitality market in Washington has been impacted by the COVID-19 pandemic, with many hotels and restaurants closing their doors or reducing their capacity. However, there is still demand for high-quality hospitality properties in popular tourist destinations like Seattle and Spokane.

Financing options for hospitality properties in Washington include traditional bank loans, SBA loans, and private equity or mezzanine financing. Interest rates and terms will depend on the lender and the borrower's creditworthiness, as well as the location and quality of the property.

Commercial Real Estate Loans by Purpose

There are many types of loans available for commercial properties in Washington, and the best fit for you depends on your investment strategy. Here are some broad categories of financing available.

Permanent Financing

Permanent financing is a type of loan that remains in place for an extended period of time. It's commonly used to finance the acquisition of commercial properties or to refinance existing debt. Types of permanent financing include bank loans, loans from government-sponsored entities like Fannie Mae and Freddie Mac, HUD loans, credit union loans, loans from life insurance companies, commercial mortgage backed securities (CMBS) loans, and other types of loans depending on the specifics of the commercial property.

Refinancing a Commercial Real Estate Property in Washington

I wouldn't quite call this a separate type of loan, but I have to mention refinancing in here. These are typically permanent loans (but not always) used to pay down an existing, partially amortizing or interest-only loan.

Often you may be able to time a refinance to happen after an interest rate drop — an ideal solution — but if your loan is maturing during a period of higher rates, you shouldn't stress too much about this. We'll work with you to find the best loan terms for your commercial property by reaching out to potentially thousands of lenders. Just complete the form below, and we'll get to it.

Construction Financing

Construction financing, also known as interim financing, is used to finance the cost of construction for commercial properties. It is usually a short-term loan that covers the cost of land development and building construction. Once construction is completed, the borrower can typically convert this into a permanent loan or pay it off with a new loan.

Bridge Loans

Bridge loans are a type of short-term loan that can be used to cover costs in the interim period between the end of one loan and the beginning of another. They are typically used in commercial real estate to finance the transition between construction financing and permanent financing. Bridge loans generally have higher costs than most other financing options and are often interest-only and non-recourse.

Commercial Real Estate Loans by Type

Depending on the purpose of your loan, you will have several financing options available to meet your investment goals. Read below to learn more about specific loan types.

Bank Loans

Bank loans are a common financing option for commercial real estate in Washington. They can offer competitive interest rates and flexible terms, but the specifics can vary greatly from bank to bank. While they may not always be the best fit for larger, more complex projects, they can be an excellent option for smaller, simpler properties.

Life Company Loans

Life company loans are typically used to finance high-quality assets in major markets. They generally have lower loan-to-value ratios than most other loan types but offer competitive interest rates and long terms. However, they may not be suitable for riskier projects or properties in less established markets.

Agency Loans

Agency loans, offered by government-sponsored entities like Fannie Mae and Freddie Mac, are typically used for properties that are mostly multifamily. They offer attractive loan terms, low, fixed interest rates, and are non-recourse. However, there are restrictions on the amount of income that can come from other commercial uses.

HUD Loans

HUD multifamily loans are government-backed loans that are primarily used for the construction, substantial rehabilitation, purchase, and refinancing of multifamily properties. These loans offer long-term, non-recourse financing with competitive interest rates but have extensive requirements for qualification.

CMBS Loans

Commercial Mortgage Backed Securities (CMBS) loans are a type of mortgage-backed security backed by commercial real estate loans. Lenders focus more on the strength of the property than the borrower's credit, making them a good option for properties with strong cash flow.

SBA Loans

Small Business Administration (SBA) loans, such as the SBA 7(a) and SBA 504, offer attractive financing options for small businesses. However, the maximum amount for an SBA 7(a) loan is $5 million, while SBA 504 loans can go up to $20 million. They cannot be used for multifamily properties and are only available for properties that the business owner occupies.

Mezzanine Loans

Mezzanine financing is a hybrid form of financing that combines elements of debt financing and equity investment. It is typically used in commercial real estate to fill a funding gap between the primary loan and the total cost of a project.

Commercial Property Insurance in Washington

This part isn't about loans, but it's just as important to your investment's success. Let's talk (quickly) about insurance.

Insurance premiums have skyrocketed in the past few years, as I'm sure you know. While multifamily gets a lot of the attention, rates for insuring anything from office buildings to shopping centers have jumped significantly.

Janover Insurance Group is dedicated to finding the best insurance solutions for your commercial real estate assets in Washington. Click to get a free insurance quote for your property — no obligation.

By City

• Seattle
• Tacoma
• Spokane
• Vancouver
• Bellevue
• Kent
• Spokane Valley
• Everett
• Renton