How to Access Equity in a Commercial Property: Smart Strategies for Business Owners

If you're sitting on a piece of commercial property in the U.S. right now, you're probably aware that there's money tied up inside those walls—maybe more than you realize. Real estate, especially commercial, is one of those assets that grows more valuable almost silently: one day, you bought it for X, now it's worth Y, and the difference—that sweet 'equity'—could be doing so much more for you than just sitting there. Here in Los Angeles, stories fly around about people using their properties to scale their business, tackle new investments, or even handle sudden cash needs. But how, exactly, do you unlock that equity without selling your property? It isn't just theory—this is a world where timing, numbers, and negotiation make all the difference.

Understanding Equity in Commercial Property

Let's pull back the curtain a bit. Equity in a commercial property is basically the current market value of your place minus any mortgage debt you still owe. For example, if your building is now appraised at $2.2 million and you owe $900,000 on it, you've got $1.3 million in potential equity. Like, that's real money—if you know how to get at it.

Commercial real estate values have exploded in some cities—Los Angeles saw downtown commercial prices jump up nearly 20% between 2021 and 2024, according to data from Cushman & Wakefield. That means tons of owners here (maybe even you) are sitting on big, untapped resources. The reasons for this boom range from land scarcity, to renewed business demand, to the new wave of investors hunting for stable returns.

It sounds simple to unlock equity, but there are hurdles. The process is nothing like tapping a residential mortgage. Lenders nitpick over occupancy rates, business income, tenant quality, asset condition, and market trends. Skip a detail or fudge a number, and your application can hit a wall. Banks treat commercial real estate like an investment, not a home—they want to know you’re not over-leveraging or blowing the liquidity.

One way to tell if you’re sitting pretty is to calculate your Loan-To-Value (LTV) ratio. Most banks like to keep this below 75%. If you own your building outright, you might access more. It's not just a math game—timing matters, market cycles play a role, and rates fluctuate like LA traffic at rush hour. If you’re thinking now’s the time, know the playing field.

Check out this table showing how commercial equity has changed recently for typical small office buildings in major U.S. cities. These numbers might spark ideas if you're a property owner considering a move:

Equity is both a cushion and a tool. But you've really got options on how to use it—selling is definitely not the only path.

Popular Ways to Tap Commercial Property Equity

Here’s where things get real. The top ways owners tap into equity without selling usually boil down to three techniques: cash-out refinancing, equity lines of credit, and selling partial interests. Each comes with its own twist, paperwork mountain, and a few risks.

Cash-Out Refinancing is the heavy hitter. Basically, you take out a bigger loan to replace your old one. The new loan gives you a lump sum—your unlocked equity—while keeping the property in your name. The catch? You’ll probably face underwriting headaches: lenders want to see high occupancy, a strong tenant mix, and stable cash flow. If you’ve just signed up your anchor tenant for another five years, banks will love you. If you’re staring at empty cubicles, maybe not so much. With commercial rates hovering between 5.5% and 7.5% lately, the monthly payment can jump, so math out your cash flow before signing papers.

Next up: the Commercial Equity Line of Credit (CELOC). This is kind of like a credit card with your building as collateral, letting you draw funds as needed—great if you want flexibility. Repay and reuse. Interest rates tend to float, and banks usually set a borrowing ceiling (often maxing out around 65-75% of your property’s up-to-date value). Lenders like to see a paper trail for your intended use—expansion, repairs, buying another building, etc. If you're not sure how much you'll need right away, this can be perfect.

Selling a partial interest or bringing on an equity partner is another path, but not for everyone. Some investors sell a stake in their property—say, 20%—to bring in capital partners or raise fast cash. You’ll need a lawyer, and detailed buy-sell agreements. Think of it as joining a business marriage; you might give up some control, but you get instant access to capital. This route is more common among folks with sizable portfolios or in syndication circles, less so for small operators or family businesses.

There are things to avoid, though. Don't lever up just because you can; commercial real estate can turn illiquid fast if the market sours. If your business takes a hit or tenants break their leases—suddenly, those new loan payments hurt more than they help. Also, watch out for prepayment penalties, environmental inspection costs, and appraisal fees. It adds up.

Here’s a quick cheat sheet for the process:

• Assess your building’s up-to-date value with a professional appraiser—banks insist on it.
• Gather financials: profit/loss statements, rent rolls, tenant lease agreements.
• Shop lenders: compare rates, fees, and flexibility; community banks sometimes offer surprising deals.
• Get ready for the deep-dive due diligence: environmental reports, title insurance, and lots of paperwork.
• Negotiate terms in writing—especially exit clauses, interest rates, and personal guarantees.
• Use your equity (wisely!)—don’t over-leverage unless you’ve got ironclad plans for the funds.

Guy Johnson, a respected broker from CBRE, once said,

"Unlocking equity isn’t a financial trick—it’s a strategic decision that can make or break your future portfolio value. Smart owners treat it as a business move, not just a cash grab."

Risks, Considerations, and Market Timing

It’s tempting to run down to your lender as soon as you see the equity numbers. Not so fast. Getting equity out of commercial property comes with real risks, and timing matters more than most folks realize.

Let’s start with interest rates. We’re living in weird financial times. The Feds hiked rates aggressively back in 2023 to battle inflation. Bank financing tightened, and some big lenders pulled back from deals they’d happily funded in 2021. In LA, more deals were killed in underwriting in 2024 than any year since the Great Recession. Today, rates are a bit better but definitely higher than the low-3% era. If you tap equity now, your new monthly payment could be double what you had before. So before you move forward, grab a spreadsheet and see if your rental income can cover the debt—even without counting your best months.

If your tenants are on month-to-month leases, you’re exposed to risk. Lenders typically like leases with at least three years left. If your building needs significant repairs or has environmental issues (older structures sometimes have asbestos, for example), expect delays or denials. And watch your personal guarantees—some loans will force you to sign, which could put your family on the line if something tanks.

Pull too much equity, and the building can tip from an asset to a liability in a downturn. In LA, after the 2008 crash, property owners who had maxed out loans saw their buildings foreclosed after losing major tenants. No equity play is worth putting your legacy property at risk. And remember—fees, appraisals, and prepayment penalties (some as high as 5%) can eat into the cash you’re expecting.

Market timing is real. Property values fluctuate. If you refi at peak prices and the market slides, you could owe more than the building is worth. One real-world example: In 2022, right as interest rates jumped, some owners in Downtown LA who refinanced at the peak saw values drop by 10% in less than a year. Suddenly, their new loans didn’t match the building value—meaning their loan-to-value ratio shot up and their equity vanished.

So, the right move? Don’t just chase the cash. Think through your long-term goals. Maybe you need funds to renovate, expand your business, or snag a second property at today’s prices—that can make sense. But don’t put yourself in a high-wire act with little safety net.

Tips for Maximizing Your Equity and Long-Term Value

If you’re thinking about unlocking equity, play it smart. Here’s what seasoned property investors do differently.

• Be picky about timing. Look at when interest rates usually dip, and try to catch the wave. Right after a rate cut, lenders get aggressive and offer better deals for well-qualified owners.
• Boost your property’s value ahead of any appraisal. Even quick upgrades—like sprucing up the lobby or updating the roof—can nudge the appraised value up, meaning more equity for you. Seriously, some owners have raised their appraisals by $100,000 with smart maintenance just before a refi.
• Get your paperwork tight. The faster you can produce operating statements, rent rolls, and lease copies, the smoother the process. Lenders don’t love surprises or missing info.
• Negotiate hard—but stay reasonable. Pit two lenders against each other. Ask for lower origination fees or better fixed-rate periods, especially if you’ve got a strong tenant lineup. LA credit unions will sometimes beat big banks if they like your story.
• Have a backup plan if your main tenant leaves. Consider adding a reserve fund or rental insurance.
• Don’t spend the equity haul unless it builds more value—buying another property or expanding is way safer than blowing cash on liabilities.

One killer fact: According to the National Association of Realtors, owners who planned ahead and waited for the right lending climate, rather than rushing, on average pulled out 9% more equity in refinancing deals than those who rushed in. Patience pays—even in fast markets like Los Angeles.

When you unlock equity, the goal is to make your portfolio stronger, your business more flexible, and your financial position safer—not riskier. The process takes research, timing, and negotiation, but when you play it right, you can turn a static asset into a growth engine. That’s how owners in LA, and across the country, build real wealth from their commercial properties without ever putting the “For Sale” sign out front.