🏢 West Houston Office Market Update: What Lenders Are Actually Financing in 2025 📊

🏢 West Houston Office Market Update: What Lenders Are Actually Financing in 2025 📊

📉➡️📈 Office Isn’t Dead—It’s Selective: A Lender’s View of West Houston Office Deals 🏢

Office Market in West Houston: A Lender’s Perspective

The West Houston office market—spanning Katy, Energy Corridor, Memorial, and Westchase—is no longer driven by broad-based demand. From a lender’s perspective, office lending in 2025 is highly selective, data-driven, and sponsor-focused.

Office is not unfinanceable. However, the bar is materially higher than it was pre-2020.

At Medallion Funds, we structure office financing based on how lenders are underwriting today, not how borrowers remember it working five years ago.

What Lenders Like in West Houston Office Properties

Despite national headlines, lenders are still active in West Houston office—if the deal checks the right boxes.

Key lender-friendly characteristics include:

• Strong in-place occupancy (70–85%+)

• Credit tenants or medical / professional users

• Suburban locations with parking advantages

• Recent leasing momentum or signed LOIs

• Reasonable basis (not peak 2019 pricing)

Medical office, owner-user buildings, and well-located suburban campuses near I-10 and Grand Parkway are consistently the most financeable assets.

What Makes Office Deals Difficult to Finance

Lenders remain cautious on properties with structural challenges.

Red flags include:

• Large blocks of vacant space with no leasing plan

• Commodity Class B office with short-term tenants

• Heavy co-working exposure

• Sponsors relying on aggressive future rent growth

• Floating-rate debt without a clear exit strategy

In these cases, traditional banks often step aside—but that doesn’t mean the deal is dead.

How Office Loans Are Being Structured in 2025

Office financing today looks very different than it did in prior cycles.

Common structures we’re seeing:

• Lower loan-to-value ratios (55–65%)

• Stronger DSCR requirements

• Partial interest-only with amortization kick-ins

• Shorter fixed-rate terms

• Additional reserves for TI and leasing commissions

For transitional office assets, debt funds, private credit, and hybrid bridge-to-perm structures are often the right solution.

Sponsor Strength Matters More Than Ever

Lenders are underwriting the borrower, not just the building.

They want to see:

• Net worth and liquidity support

• Prior leasing or repositioning experience

• A credible business plan

• Realistic exit assumptions

Strong sponsors with realistic expectations are still closing office deals—even in a cautious lending environment.

The Opportunity: Reset Pricing + Flexible Capital

The silver lining for office investors in West Houston is pricing reset.

Well-capitalized buyers can:

• Acquire assets below replacement cost

• Reposition underutilized space

• Negotiate favorable tenant concessions

• Use flexible capital to stabilize before refinancing

This is where a mortgage broker with multiple capital sources becomes critical.

Final Thoughts from a Lender’s Seat

The West Houston office market is not frozen—it’s filtered.

Deals are closing, but only when:

• The numbers make sense

• The sponsor is credible

• The capital stack is structured correctly

At Medallion Funds, our role is to match office properties with lenders who actually understand today’s market—and to structure financing that works in the real world.

If you’re evaluating an office acquisition, refinance, or recap in West Houston, the right conversation upfront can save months of wasted effort.

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© 2023-2024 Bill Rapp, Medallion Funds LLC, Director of Capital Advisory