Can you still finance a Dallas office building? Yes, but the submarket decides how much

The short answer: yes, but maybe not the amount you need

You can still get a loan on a Dallas office building. Banks, life insurance companies, CMBS lenders, debt funds and family offices are all lending on office, but they are selective, and the loan amount depends heavily on your submarket, your occupancy, how much of the rent roll expires during the loan term and which lender type you approach. A well-leased building in a strong submarket can finance on reasonable terms. A building with rollover risk in a high-vacancy area may get a loan that falls short of its current payoff.

At Terrydale Capital we finance office along with apartments, self-storage, retail and industrial, and we published a market update on exactly this question. What follows draws on that update and explains how an office owner can tell which side of the line their building falls on.

One metro, very different office markets

Citywide numbers hide most of what matters. Our update cites CBRE's third-quarter 2026 report showing DFW office vacancy down 40 basis points to 24.6 percent, with about one million square feet of net absorption. Cushman and Wakefield expects about 319,000 square feet of new office to deliver in 2026, the lowest since 2012, which helps existing buildings.

The submarket spread is wide. Using Kidder Mathews second-quarter 2026 data, our update lists direct vacancy of 5.3 percent in Preston Center, 20.8 percent in Uptown and Turtle Creek, 29.0 percent in Las Colinas and 32.2 percent in the central business district. A lender looking at a Preston Center building and one downtown is looking at two different risk profiles, even if the buildings themselves are similar.

Why lenders remain cautious about office

Lender caution comes from the national picture as much as the local one. Our update cites Commercial Observer data showing office CMBS delinquency at 13.2 percent in August 2026, the highest since at least 2019, with conduit office at 14.4 percent and about 39 billion dollars of office CMBS maturing over the following 12 months. Lenders who are working through troubled office loans elsewhere bring that experience to every new office request.

Locally, demand is concentrating in the strongest locations. The same update notes Savills reporting Preston Center landlords holding at 90 dollars per square foot and up for new deals, while downtown landed none of the region's 20 largest leases in the first half of the year. For a borrower, the practical lesson is that lenders will ask where your tenants could go if they left, what it would cost to replace them and how your building competes with newer or better-located space nearby. Have those answers ready, with numbers.

Three tests decide the loan, and the smallest one wins

Lenders size commercial loans using three tests: loan-to-value, debt service coverage and debt yield. Each one produces a maximum loan, and the lowest of the three is what you get. On office today, debt yield is usually the binding constraint. Debt yield is simply net operating income divided by the loan amount, and lenders want a larger cushion in weaker submarkets.

The example in our update shows how much that cushion matters. With 1.5 million dollars of net operating income, a 9.5 percent debt yield supports a loan of about 15.79 million. A 12 percent debt yield supports 12.5 million. That is a difference of about 3.29 million dollars on the same income, driven entirely by how the lender views the submarket. On a 14-million-dollar payoff, the owner in the weaker location needs to bring roughly 1.5 million to closing.

Lease rollover takes a second bite

Lenders also look hard at which leases expire during the loan term. In our update's example, a tenant paying 300,000 dollars a year with a lease expiring in 18 months is removed from the underwritten income, cutting net operating income to 1.2 million. At a 12 percent debt yield, the loan falls to 10 million, and against the same 14-million-dollar payoff the gap grows to 4 million.

Lenders may also hold back reserves for the tenant improvements and leasing commissions needed to re-lease that space. That is why a renewal signed before you apply can be worth more than almost any other improvement to the building. If a significant tenant is approaching expiration, getting that renewal executed is part of the financing plan, not just the leasing plan.

Expect detailed questions about each major tenant: its business and credit, how long it has occupied the space, whether it has expanded or contracted, any early termination or contraction rights, and whether it has signaled its plans. A lease abstract that answers those questions up front saves weeks of back-and-forth and shows the lender you understand your own rent roll.

Who is still lending on office, and what each wants

Our update describes each lender type's current posture. Matching your building to the right one is often what separates a workable loan from a dead end. If you own an office building with a maturity or a purchase on the calendar, this is a sensible point to have the numbers run against each option.

• Banks: still lending, but trimming exposure and favoring existing deposit relationships, smaller loans and full recourse.
• Life insurance companies: high occupancy, strong tenants and low leverage, which suits the best buildings in the strongest submarkets.
• CMBS: selective after the past two years, with conduit lenders choosing their office deals carefully.
• Bridge lenders and debt funds: more expensive, but willing to lend on expected occupancy gains.
• Family offices: able to act on deals institutions pass on, especially with a strong sponsor track record.

If your business occupies the building, look at SBA

Owner-occupants have an option investors do not. Our update notes that owners occupying at least 51 percent of a building may qualify for SBA financing with higher leverage than conventional office loans. The SBA's own 504 page lists the purchase, construction or renovation of existing buildings or land among eligible uses, and lists speculation or investment in rental real estate among the uses that are not allowed. In other words, it is built for companies buying a home for their own operations, not for landlords.

If you are a business owner deciding whether to keep leasing or buy, the financing is only half of the question. Julie Smith's guide on renewing, moving or buying when your lease is up covers the space side, and we can show you what an owner-occupied purchase would look like on the financing side.

Getting an office building ready for a lender

Office refinances take longer than most, and our update recommends starting about 18 months before maturity. Use that time on the items that change the loan amount, not just the paperwork.

Our update also points out that the debt yield math is a single division, so there is no reason to wait for a lender to tell you the answer. Take your net operating income, adjust it for any lease that expires within the likely loan term, and divide by the loan you need. If the result is below what lenders in your submarket require, you know the size of the gap months before anyone issues a term sheet, and you can decide whether to close it with renewals, equity or a different structure.

• Clean up the rent roll and prepare lease abstracts before any lender sees them.
• Pursue renewals, especially for leases expiring within the new loan term.
• Run all three sizing tests yourself before shopping, using realistic debt yields for your submarket.
• Tell your building's story against its submarket, not the citywide average; strong occupancy in a weak submarket is worth highlighting.
• Talk to your current lender early, since an extension paired with a partial paydown can cost less than a new loan.

Where office owners lose leverage they did not have to

The first mistake is waiting. An office owner who starts six months before maturity has no time to secure renewals, and every unrenewed lease becomes a haircut in underwriting. The second is presenting the building with metro averages. If your building outperforms its submarket, the package has to show that with comparables and tenant detail, or the lender will assume the average.

The third is approaching only the current bank. If that bank is cutting office exposure, its answer reflects its portfolio, not your building. The fourth is ignoring the cash side of the equation. If the realistic loan falls short of the payoff, the options are equity, subordinate capital, a bridge loan, a sale or a negotiated extension with a paydown, and each takes time to arrange. If you are deciding who should run that process, I compare the routes in broker or bank for a commercial loan.

Bringing an office deal to Terrydale

Send us the rent roll, lease abstracts or leases, trailing operating statement, current loan documents or purchase contract and a note on any tenants who are negotiating renewals. We size the deal under each lender type's likely terms, show you the realistic loan amount and the gap, if any, and recommend a structure. My guide to the documents lenders want lists what to gather, and once a loan closes, the work shifts to the reporting and covenants I describe in what a lender expects after closing.

Our headquarters is on Prospect Avenue, and we close loans across Texas and in other states. You can submit the deal through Terrydale Live or schedule a call with me. Office is a harder asset to finance than it was a few years ago, but it is not unfinanceable, and the owners who prepare early have far more options than the ones who wait for the maturity notice.

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