2024–2025 Interest Rate Trend

(Industrial & Commercial Properties)

2024: Elevated Rates Become the New Normal

By 2024, commercial loan interest rates for industrial and commercial properties had clearly moved away from the low-rate environment of earlier years. Based on market indications from major local and international banks, most loans were priced on a floating basis at approximately:

• 1M or 3M SORA + 0.6% to 0.9%*, depending on asset quality and borrower strength.

While the pace of rate hikes had slowed, borrowing costs remained elevated. Banks became more selective, placing greater emphasis on:

• Strong tenant profiles and lease tenure

• Asset specification and operational relevance

• Debt servicing and interest coverage ratios

  
  

For investors, this marked a shift in mindset. Deals were no longer underwritten purely on capital appreciation or low-cost leverage. Instead, cash flow resilience and downside protection became central to investment decisions.

2025: Rates Stabilise, But Financing Discipline Tightens

Moving into 2025, commercial loan rates appear to have stabilised at higher levels, rather than retracing meaningfully downward. Margins over SORA remain broadly similar to 2024, with banks differentiating pricing more sharply between prime and non-prime assets.

Key characteristics of the 2025 lending environment include:

• Greater scrutiny on refinancing risk

• Tighter loan structures for older or secondary assets

• Preferential pricing for well-located industrial properties with strong fundamentals

  
  

While borrowing remains more expensive than in the pre-2023 period, the reduced volatility has provided investors with greater clarity. This has allowed buyers and owners to plan financing strategies more deliberately, including:

• Shorter loan tenures

• Partial debt repayment

• More conservative leverage levels

What the 2024–2025 Trend Tells Us

Looking at 2024 and 2025 together, several clear trends emerge for industrial and commercial property financing:

1. Higher rates are structural, not temporary The era of ultra-cheap commercial borrowing has likely passed.

2. Asset quality directly impacts loan pricing Banks are clearly rewarding stronger assets with tighter margins.

3. Financing strategy now drives investment performance Investors who manage leverage, cash flow, and refinancing risk carefully are better positioned to navigate this environment.

Source Note: * Data collected from multiple banks, i.e. DBS, CIMB, OCBC, Maybank, etc from various periods between 2024 - 2025.