How do commercial property loans work in Spain?
Spanish commercial loans fund offices, retail, logistics and hospitality assets at typically 50–65% loan-to-value over five to fifteen years, priced over Euribor. Lenders size debt on rental income and debt-service cover, usually requiring cover of around 1.3 times or better.
- Tenant covenant and lease length drive both leverage and pricing.
- Hospitality is underwritten on stabilised trading, not headline revenue.
- SL and SPV borrowing structures are the market norm.
- Interest-only periods are available during letting-up or refurbishment.
Key takeaways
- Investment finance is typically available up to 55–65% LTV, with DSCR of 1.25–1.50x.
- Hospitality and logistics attract the strongest lender appetite in the current cycle.
- Owner-occupier facilities can be more competitive than pure investment loans.
- Pricing varies by asset quality and business plan, with prime assets attracting the tightest margins.
- Terms of 5–10 years with amortisation over 15–25 years are standard.
The Spanish commercial lending market
Spanish commercial property lending is provided by domestic banks, pan-European lenders, insurance companies and a growing set of debt funds. Post-2022, sector selection has become the primary driver of both availability and pricing: logistics and hospitality are actively bid; secondary retail and older office stock face a narrower lender universe.
Sector-by-sector appetite
- Logistics & industrial: strong appetite; 60–65% LTV for prime last-mile assets on long leases.
- Hospitality (hotels & resorts): selectively active; 55–60% LTV on trading assets, higher for branded 4–5* with strong ADR/RevPAR performance.
- Offices: polarised — prime, well-let CBD assets fund at 55–60% LTV; secondary or vacant stock is challenging without a value-add debt fund.
- Retail: supermarket-anchored and retail parks well received; high-street secondary and shopping centres more selective.
- Residential (PRS/BTR): emerging institutional sector; 55–60% LTV for stabilised portfolios.
How lenders size the loan
Investment facilities are typically sized against three tests, with the lowest governing:
- LTV: 55–65% of open-market value from a lender-appointed valuer.
- DSCR (Debt Service Coverage Ratio): passing rent divided by debt service, typically required at 1.25–1.50x.
- ICR (Interest Coverage Ratio): passing rent divided by interest cost, typically 1.75–2.25x.
WAULT (weighted average unexpired lease term), tenant covenant and asset quality all materially influence sizing and pricing.
Loan structures and terms
- Term: 5–10 years, occasionally 15 for insurance-company lenders.
- Amortisation: 15–25 years, or interest-only for prime assets with strong income.
- Rate: a margin over the relevant benchmark rate, with hedging (swap or cap) usually required.
- Fees: 0.75–1.5% arrangement; 0.25–0.75% commitment; exit fees uncommon on senior debt.
- Security: first-charge mortgage over the asset, share pledge over the SPV, assignment of rents and insurances.
Owner-occupier facilities
Where a Spanish trading business owns or plans to purchase its operating premises, owner-occupier facilities are often the most competitive route to market — pricing benefits from the underlying trading covenant, and LTVs of 65–70% are achievable. These sit alongside working capital lines from the same relationship bank.
Typical process and timeline
- Weeks 1–2: information memorandum, lender shortlisting and initial term sheets.
- Weeks 3–5: credit committee submission and preferred lender selection.
- Weeks 5–9: third-party reports (valuation, legal DD, technical, environmental).
- Weeks 9–12: facility documentation and notary completion.
Frequently asked
Questions from readers
What is the minimum loan size for commercial property in Spain?
Spanish banks typically start at €1–2m. Institutional lenders and debt funds usually require €10m+. We regularly transact across the €2m–€100m+ range.
Are non-recourse facilities available?
Yes — non-recourse or limited-recourse structures are available for investment assets from debt funds and select international lenders, typically at a modest pricing premium.
How is hedging structured?
Interest rate hedging (swap or cap) is usually a condition of drawdown on floating-rate facilities. We coordinate hedging execution alongside the loan documentation.
Can international investors borrow directly?
Yes. UK, EU and non-EU investors are actively funded, generally borrowing through a Spanish SPV (SL) for tax and security efficiency.
What DSCR do lenders require?
Typically 1.25–1.50x on an actual interest basis, sometimes stressed to a hurdle rate of 5–6%. Prime assets on long leases can achieve lower thresholds.