Private credit is fast emerging as a major force in commercial property finance, stepping into a widening void as banks retreat from higher-risk lending and developers demand faster, more flexible capital.
A new CBRE report forecasts that non-bank lending in Australian real estate will climb from $50 billion to $90 billion by 2029 - an 80 per cent increase in just five years.
The report, Private Credit in Australian Real Estate, highlights a market in flux, as institutional capital backs new funding models and non-bank lenders move into territory that traditional banks are leaving behind.
We spoke to industry experts - CBRE’s Pacific Managing Director, Debt and Structured Finance, Andrew McCasker, and MaxCap Group’s Global Head of Capital, Robert Hattersley - to explore what’s driving the shift.
Banks Pull Back, Private Credit Steps Up
Australia’s $12.35 trillion real estate sector remains heavily bank-backed, with $2.74 trillion in loans from banks and authorised deposit-taking institutions (ADIs).
However, CBRE data suggests that dominance is weakening - particularly in higher-risk, complex, or non-standard transactions.
Private credit already funds around 26 per cent of residential development, including land subdivisions.
Its share of commercial property debt remains smaller at just 4.2 per cent, but that is expected to rise.
At the core of the shift are regulatory changes pushing banks toward safer, simpler loans.
Projects involving repositioning, value-add strategies or transitional assets are increasingly left without traditional financing options.
“It is expected private credit will continue to expand into the Australian market as the demand for commercial real estate debt continues to grow and the domestic banks focus on more vanilla, less risky transactions,” said Mr McCasker.
“The ability for borrowers to access private credit will also continue to drive growth and demand in this space.”
Developers chasing speed, flexibility or non-traditional terms are increasingly turning to non-bank lenders to get projects across the line.
“The surge is being driven by investors looking for complementary investment opportunities in addition to direct asset ownership,” Mr McCasker said.
Institutional Capital Brings Scale and Stability
A major factor fuelling this growth is the flow of institutional funds into private credit.
CBRE forecasts between $8 billion and $10 billion in new capital could enter the sector annually through to 2029, as superannuation funds, insurers and other institutions chase better risk-adjusted returns than traditional bonds can offer.
According to Mr Hattersley, three key forces are drawing institutional investors into the market.
“First, there’s a significant yield gap that institutional investors are looking to fill,” he said.
“With traditional fixed income yields remaining relatively low, private real estate credit offers institutional investors the opportunity to earn returns of 5-8% above the RBA cash rate, while maintaining strong downside protection.”
Second, he said Australian institutions recognise they are underweight compared to their peers in North America and Europe.
“This gap represents an enormous opportunity,” he said.
Finally, Mr Hattersley pointed to a demographic imperative.
“Australia faces a $US1+ trillion retirement savings gap as part of the global $US100+ trillion shortfall,” he said.
“Institutional investors need income-generating assets that can match their long-term liability profiles, and private credit’s patient capital approach aligns perfectly with this need.”
MaxCap Group has seen this trend play out through its investment trust, which has attracted capital from pension funds, insurers and family offices “precisely because it delivers consistent monthly distributions backed by real assets.”
This capital inflow is allowing private lenders to fund larger, more complex transactions — and compete more directly with banks in the commercial space.
Top Players Take Lead as Sector Matures
The market is also consolidating, with the top 10 private credit providers now responsible for 85 per cent of total lending activity.
However, Mr McCasker sees this trend as a sign of maturity, not market capture.
“I don’t believe market consolidation will have a negative impact on the market or borrowers,” he said.
“Rather, consolidation will create greater competition within the private credit market.”
Mr Hattersley agrees that institutional capital is reshaping the market — not just through scale, but through influence.
“Institutions are becoming active partners in shaping how private credit operates,” he said. “Their involvement brings deeper liquidity, more standardised reporting, and professional management standards that make private credit a genuine alternative to traditional bank financing rather than just a niche funding source.”
For commercial borrowers, the trend points to a more stable private credit sector poised to become a central pillar of Australian real estate finance.
