- Private credit (debt funds) have filled the void left by regional banks that pulled back from CRE lending after 2022.
- Private credit lenders move faster (2–4 week closings), offer more flexible structures, but price 100–200 bps above bank rates.
- Banks still dominate relationship lending, construction loans under $20M, and markets where they have community presence.
- CMBS is the best option for large ($5M+) stabilized assets — non-recourse, long-term fixed rate, no relationship required.
- Borrowers with the best deals access all three channels and choose the lowest all-in cost of capital for each transaction.
The 2022–2024 banking stress cycle — triggered by the Fed's rate hikes, the SVB/Signature/First Republic failures, and subsequent regulatory pressure on bank CRE concentrations — fundamentally shifted the landscape of commercial real estate lending. Regional banks, which had historically dominated middle-market CRE lending, retrenched. Private credit funds moved in to fill the gap. By 2026, the CRE debt market has three distinct channels, each with its own strengths, pricing, and deal profile.
The Bank Channel: Still Dominant in Relationships
Community and regional banks (under $100B in assets) remain the primary lender for CRE loans under $5M and for borrowers with deep banking relationships. Banks offer recourse loans at floating rates (Prime or SOFR-based), typically with 3–7 year terms and balloon maturities. Their advantages: relationship pricing, local market knowledge, and the ability to structure around unique deal characteristics that CMBS or private credit underwriters won't touch.
The headwind: regulators have pushed banks to reduce CRE concentration ratios (total CRE loans as a % of Tier 1 capital). Banks at or near their concentration limits are actively shrinking their CRE books — a borrower with a good deal but no existing bank relationship may find bank capital unavailable regardless of credit quality.
The Private Credit Channel: Speed and Flexibility at a Price
Debt funds (Blackstone, Ares, KKR Real Estate Credit, and dozens of mid-market funds) have grown from a niche market player to a mainstream CRE lending channel since 2020. Their value proposition: 2–4 week closings, higher leverage (75–80% LTC), flexible structures (interest-only, flexible prepayment, non-standard asset types), and willingness to lend where banks won't. The cost: SOFR + 350–600 bps — typically 150–200 bps above bank rates for comparable credit quality.
Private credit wins for: bridge loans, value-add deals, ground-up construction above $20M, transitional assets, and any deal where speed or structure matters more than pricing.
The CMBS Channel: The Best Price for Stabilized Assets
For stabilized income-producing properties above $3M in loan size, CMBS remains the lowest cost of capital available in 2026 — fixed rates 150–300 bps below bank and private credit alternatives, with non-recourse structure and 10-year terms. CMBS wins where the property has 12+ months of stable performance, the loan size is above $3M, and the borrower is willing to accept the servicing constraints that come with securitization.
Choosing the Right Channel in 2026
| Deal Type | Best Channel |
|---|---|
| Stabilized hotel/multifamily $3M+, want non-recourse | CMBS |
| Value-add acquisition, 70%+ LTC, need speed | Private credit bridge |
| Long-term relationship bank client, $1M–$5M loan | Community/regional bank |
| Construction $5M–$20M, established sponsor | Bank or private credit |
| Rural market, hotel or assisted living, need 80% LTV | USDA B&I (government) |
First Realty Capital accesses all three lending channels — CMBS, bank, and private credit — to find the best cost of capital for each deal. Request a lender comparison for your next transaction.
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