A review of C-PACE in 2025 and looking forward to 2026

What defined CRE in 2025, and where did C-PACE fit in?

In 2025, commercial real estate continued its shift away from traditional bank financing and toward private credit. While bank lending picked up in select markets, private credit largely filled the financing gaps left behind. Equity, whether from co-GPs or third-party preferred equity providers, remained difficult to source.

Certain asset classes held up well or continued to grow. Industrial, data centers, and multifamily benefited from strong fundamentals and sustained demand. Office, by contrast, remained challenged, with the fundamental “basis” question remaining to be a head-scratcher, especially in the face of huge tenant improvement checks.

 

A shift to mainstream financing

Specific to C-PACE, in 2025 the product definitively shifted from “niche” to mainstream. Originations grew significantly, reaching a record $3.5 billion by most industry estimates as awareness expanded among owners, lenders, and institutional investors. Deal sizes increased materially, with financing sizes frequently exceeding $100 million.

C-PACE played several important roles. It helped fill gaps left by traditional lenders, blended with senior debt to lower the overall cost of capital, gained recognition from institutional investors as a distinct asset class, integrated more deeply with lenders and debt funds, and continued to expand geographically into new states and jurisdictions.

 

Trends expected in 2026

Debt markets are beginning to reopen. Banks, insurance companies, and private credit lenders are increasing originations, credit spreads have tightened, and capital is returning to the sector. That said, lenders remain selective, particularly for speculative development and large construction loans, which continues to create demand for alternative capital.

Overall, 2026 looks like a measured recovery. There is more capital available and greater pricing clarity, but underwriting discipline and structural caution remain. The market will continue to reward high-quality assets, conservative underwriting, and thoughtful, creative capital structures.

 

In 2026, C-PACE will further cement its role as an established and reliable structural component of commercial real estate capital stacks

 

C-PACE keeps deals viable

Recapitalizations remain a core C-PACE use case. Owners are using it to restructure existing capital stacks, refinance properties, and reduce senior leverage as traditional debt remains constrained. As lenders stay conservative on development and construction lending, C-PACE is increasingly used to fill those gaps, especially for projects with sustainability, energy efficiency, or resilience components.

Developers are also using C-PACE in hybrid capital stacks, pairing it with senior debt and other alternative financing to optimize overall cost of capital. Adaptive reuse projects, particularly office conversions, continue to stand out as strong use cases where traditional lenders may be hesitant or overly punitive on pricing.  We’re also seeing “stretch” C-PACE emerge in certain markets, creating scenarios where C-PACE can fully replace the need for a mortgage loan altogether, significantly simplifying the captack.

At the same time, C-PACE continues to move toward broader institutional acceptance. Larger deal sizes and increased participation from insurance capital and other long-duration investors are reinforcing its credibility. Record-setting transactions signal growing adoption and asset class maturity.