The landscape of commercial-real-estate (CRE) financing is shifting.
The traditional bank-syndicated debt model is no longer the default. Enter private credit — flexible, capable, and increasingly dominant in real-estate capital stacks.
Why now?
Banks are retrenching. Regulatory pressure, risk-averse lending committees, and rising interest-rate costs have caused many banks to pull back from higher-leverage real-estate lending. The result: a structural gap in CRE debt financing. McKinsey & Company+1
At the same time, the private credit ecosystem has grown massively. With assets under management approaching $1.6 trillion in the United States alone, and direct-lending strategies rapidly scaling up, the capability exists to fill the void left by banks. Cambridge Associates+1
Finally, CRE itself is under pressure: higher borrowing costs, elevated cap-rates, and demand-side shifts in office, retail, and even multifamily all require creative capital solutions. In this context, lenders who can move quickly and structure bespoke deals are gaining an edge. United States of America+1
How private credit is showing up in CRE capital stacks
- Refinancing & rescue financing: For sponsors facing upcoming maturities or existing loans under stress, private credit lenders are stepping in with bridge or restructuring capital where banks won’t.
- Mezzanine and preferred-equity structures: Beyond senior debt, many deals now include subordinated layers provided by private credit funds — offering flexibility and speed.
- Portfolio & platform financing: Developers and operators that previously relied on banks are increasingly tapping private credit for financing across multiple assets, leveraging scale and customization.
- Joint bank/private credit deals: Some banks are partnering with private credit funds to participate in transactions, using the fund as the flexible credit provider and the bank as the anchor or arranger. Dechert+1
The key advantages
- Speed & certainty: Private credit funds can often close faster than banks, with fewer regulatory hurdles and fewer committees.
- Customization: Deal terms, covenants, and structures can be tailored — which matters when a real-estate platform needs a creative solution rather than a cookie-cutter loan.
- Floating-rate and yield appeal: Many private credit loans are floating-rate, which in a rising-rate environment offers borrowers and lenders aligned incentives. Morgan Stanley+1
- Access to stressed or opportunity situations: In real-estate markets where some assets or portfolios are under pressure, private credit providers may find advantaged entry points. United States of America
Considerations for sponsors and investors
While the opportunity is compelling, both borrowers and investors should tread thoughtfully:
- Underwriting matters: Given the heterogeneity of CRE assets and the evolving capital structure, diligence on underlying property, cash-flow, and exit strategy remains critical.
- Manager selection is key: Because private credit lacks the transparency of public markets, selecting a fund or lender with strong track record, alignment, and structure is vital. Elements
- Liquidity and exit planning: These loans tend to be less liquid than syndicated bank debt; sponsors and investors should align term, amortization, and refinancing strategy accordingly.
- Risk pricing and capital stack alignment: While private credit can fill gaps, it may command higher pricing or tighter covenants reflecting risk. Both borrowers and investors must ensure the overall capital stack makes sense.
The takeaway for real-estate private-equity firms
For GPs and sponsors operating in today’s CRE environment, moving beyond the traditional debt stack is no longer optional — it’s strategic. Incorporating private credit as a core part of the financing strategy unlocks flexibility, can accelerate execution, and can open access to assets or situations out of reach via traditional banks.
From an investor perspective, understanding how private credit is becoming integral to CRE financing offers an opportunity to engage earlier in the capital stack and to capture differentiated risk-adjusted returns, provided the underwriting and structure are sound.
As the role of private credit in real-estate continues to evolve from niche to mainstream, firms that embrace it proactively will be better positioned for both opportunity and resilience.