At Connect CRE LA, we have a finance panel every year. This year, it was split 50/50 between private & alternative capital providers. In commercial real estate, the continued rise of private credit is becoming impossible to ignore.

Since 2020, the asset class has grown from approximately $500 billion to $1.3 trillion in the U.S., now representing nearly 30% of corporate lending. Meanwhile, the broader leveraged finance market has expanded to roughly $4.2 trillion. As traditional banks continue to pull back from certain lending activities and demand for flexible financing grows, private credit is increasingly evolving from a niche alternative investment into a core allocation within portfolios.

A few years ago, private lenders were often viewed as a backup option when traditional financing wasn't available. Today, they're becoming a go-to source of capital for everything from acquisitions and development projects to refinancings and bridge loans. Private CRE credit has evolved into a core portfolio allocation. Investors are increasingly integrating real estate debt strategies into income-focused and diversified portfolios rather than treating them as opportunistic or exception-based investments.

The numbers tell the story. Last month, Citi and BlackRock's HPS Investment Partners launched a €15 billion private credit program focused on borrowers across Europe and the U.K. At the same time, institutional investors continue pouring money into the sector, with the Texas County & District Retirement System recently deploying nearly $1 billion into private credit strategies.

Connect Money recently reported that Blackstone's Private Credit Fund limited investor redemptions after withdrawal requests exceeded quarterly limits, highlighting both the surge in investor demand and the liquidity constraints inherent in private markets. It's a reminder that private credit has evolved from an alternative strategy into a long-term portfolio allocation for many investors.

Commercial real estate is seeing the impact firsthand. Recent Connect Money coverage also highlighted Värde Partners' $1 billion CRE CLO backed primarily by multifamily and industrial loans, as well as Arixa Capital's $200 million securitization designed to expand lending capacity. These aren't niche transactions. They're signs of a market that's continuing to mature and scale.

What's driving the growth? Part of it is simple. Many banks remain selective, particularly when it comes to construction lending, office assets, or more complex deals. Private lenders have stepped in to fill those gaps, often offering greater flexibility and faster execution.

However, that doesn't mean banks are going away. Rather, borrowers today have more financing options than they've had in years. And in many cases, private credit is becoming an important part of the capital stack alongside traditional debt and equity.

As billions of dollars in commercial real estate loans come due over the next few years, expect private credit to remain a major player. What was once considered an alternative source of financing is quickly becoming part of the mainstream.

Do you think private credit will continue gaining market share, or will banks reclaim ground as lending conditions improve? Let me know in the comments on LinkedIn.