After nearly three years of volatility, the commercial real estate debt markets are finally showing signs of normalization. With interest rates easing, banks have returned to the market in force.
According to Newmark’s Q3 capital markets report, bank lending on commercial real estate is up 85% year-over-year, reaching roughly $227 billion, a level that hasn’t been seen since before the pandemic. For developers and property owners, this is welcome news. Traditional capital sources are more available, more competitive and offering leverage that simply wasn’t on the table during the tightening cycle of 2022-2024.
Yet even as banks re-enter the space, C-PACE continues to play a powerful role in modern capital stack formation. The value proposition has evolved, not as a substitute for bank debt, but as a strategic complement to it.
C-PACE provides long-term, fixed-rate, non-recourse financing that can dramatically improve a project’s overall economics. By blending C-PACE with conventional debt, sponsors can lower their weighted average cost of capital (WACC) and create more sustainable structures. The product’s extended capitalized interest and interest-only periods create early-stage breathing room, strengthening cash flow during lease-up, stabilization or renovation. In turn, this often results in improved debt service coverage ratios, stronger cap rates, and enhanced asset performance over time.
Even in a friendlier lending environment, these advantages are meaningful. Banks may be increasing their leverage, but they still face regulatory limits and underwriting constraints. Meanwhile, construction costs remain elevated, insurance expenses are climbing and many assets still require significant reinvestment to stay competitive. C-PACE steps in to finance energy and water-efficiency improvements without adding strain to the senior lender’s position.
Another defining benefit: C-PACE assessments transfer upon sale, giving buyers the ability to assume low-cost, long-term capital already embedded in the property. This feature reduces refinancing risk and removes the burden of renegotiating terms in a future rate environment that may look very different from today’s.
As bank lending activity rebounds, developers are not choosing between C-PACE and traditional financing — they’re increasingly choosing both. The result is a more flexible, more resilient capital stack and a more sustainable facility designed for today’s market realities and tomorrow’s opportunities.