Office repositioning bridge underwriting layers TI/LC reserves (sized off projected leasing schedule), common-area amenity capex, and base-building upgrades. Leasing-velocity assumptions drive interest-reserve sizing and good-news-draw triggers; conservative comps win lender confidence.
Office bridge mechanics in a transitional leasing market
Capex-package underwriting: TI/LC reserves are sized off the projected leasing schedule (usually $60 to $120 PSF on full-floor moves in major markets, $25 to $60 PSF on smaller suites), common-area amenity capex (modern lobby, gym, conference, food-service amenity is often required to compete on lease-up), and base-building upgrades (HVAC efficiency, restrooms, elevators, life-safety).
Leasing-velocity assumptions are the most-scrutinized line. Lenders pressure-test sponsor leasing PACE assumptions against direct-leasing comps (recent deals at the asset and competitive set), the broker's exclusive-listing record, and the sponsor's own track record on similar repositionings. Aggressive leasing assumptions get re-cut at underwriting; conservative assumptions get the deal funded.
Good-news draw triggers on office repositioning typically tie to (1) signed leases with rent commencement triggering specific TI funding releases, (2) trailing-12 NOI thresholds for base-loan earn-outs, and (3) capex-completion-and-CO milestones for amenity-package draw releases. Lender controls TI/LC reserves at deposit; sponsor controls draw timing inside the funded commitment.
Sources
- Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS) · Board of Governors of the Federal Reserve System · 2026-Q1
- NAIOP Research Foundation: Industrial Space Demand Forecast · NAIOP Research Foundation · 2026-Q1
- Semiannual Risk Perspective · Office of the Comptroller of the Currency · 2025-12