The commercial real estate financing landscape is in the midst of a meaningful recalibration. Banks have re-entered the market after a period of heightened caution, but their lending posture remains disciplined and selective. Regulatory capital requirements, balance sheet considerations and a continued focus on risk management mean that certain segments — particularly construction, development and transitional assets — still face constrained access to traditional bank capital.
At the same time, private credit has continued to mature and expand its role. In particular, alternative lenders, through debt funds and other investment vehicles, have evolved into consistent, reliable sources of capital, helping borrowers navigate a market defined by selective underwriting and heightened scrutiny. What is emerging is not a replacement of banks by alternative lenders, but a more balanced and collaborative financing ecosystem that better reflects today’s market realities.
The data illustrates the scale of this shift. According to PGIM and MSCI, non-bank lenders now account for roughly half of all new U.S. construction lending, a sharp increase from less than 25 percent in 2019. This growth reflects both structural and cyclical forces. As banks operate within tighter regulatory and capital frameworks, alternative lenders have been able to provide flexibility, speed and customized solutions for projects that may not fit neatly within traditional lending parameters.
This dynamic is especially evident in development and value-add strategies. Moderate loan-to-value thresholds at banks have created funding gaps for many high-quality projects. Investment managers — through debt funds and other vehicles, including separate accounts — are increasingly stepping in to bridge that gap, providing capital that sits between senior bank loans and sponsor equity. At times, this private capital is taking the place of institutional equity, which has been less active over the last few years. In doing so, these alternative lenders are enabling sponsors to execute business plans while maintaining prudent capital structures.....
