Private Credit Reshaping CRE Financing
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Diverging Reports Breakdown
Private Credit Reshaping CRE Financing
Nonbank lenders are playing a bigger role in commercial property finance. Credit firms often accept higher loan-to-value ratios than banks. Moody’s forecasts that nonbank lenders will account for more than 10% of the $8.9 trillion commercial real estate market. Some experts warn that private credit’s rapid growth could elevate systemic risk.
NEW YORK — Private credit is playing a larger role in commercial property finance, bringing increased liquidity along with heightened exposure to risk, according to a report from Moody’s Ratings.
With banks pulling back from lending due to higher interest rates and declining commercial property values, private credit firms are stepping in to meet borrower demand. Credit firms often accept higher loan-to-value ratios than banks, which can lead to higher default risk.
Moody’s reported the average ratio in the largest 100 loans issued by 41 European and U.S. banks has risen to 74%, compared with 55% in the original loans or recent appraisals. This is due to declines in commercial property market demand for shopping malls and office buildings, which has undermined commercial property values.
While some experts warn that private credit’s rapid growth could elevate systemic risk, others say its flexibility fills gaps that traditional lenders may avoid.
Keith Banhazl, a Moody’s managing director, said, “Shorter term financing creates opportunities – or these gaps – where traditional lenders, if they choose to be picky, may allow a private-credit lender to step in and fill a void.”
With banks focused on deleveraging their assets in the next three to five years, Moody’s forecasts that nonbank lenders will account for more than 10% of the $8.9 trillion commercial real estate market.
Source: Wall Street Journal (07/15/25) Taylor, Issac
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