Overview: As of mid-2025, commercial real estate (CRE) players across Texas and high-growth Sunbelt markets face a notable funding gap. Traditional banks have tightened lending, creating a void in capital availability for commercial real estate deals. In Texas especially, demand for CRE financing remains robust thanks to strong job growth and population gains, yet many brokers and sponsors are finding that conventional lenders can’t keep up. Private credit lenders are increasingly stepping in to fill this gap, providing bridge loans and short-term CRE financing solutions to keep deals moving. This article explores why this funding gap exists in 2025 and how non-bank lenders are helping to bridge it.

Why is There a CRE Funding Gap in 2025?

Several converging factors have led to a capital gap for commercial real estate deals in markets like Texas, Florida, and Georgia:

• Bank Lending Pullback: After years of loose credit, major banks began tightening lending standards. Economic uncertainty and regulatory pressures have made banks more risk-averse. Many borrowers who easily obtained loans a few years ago now struggle with stricter criteria. Big banks and even regional banks have curtailed CRE loan growth, especially for construction, value-add, or other higher-risk projects. This retrenchment leaves worthy projects unfunded.
  
  

• Higher Interest Rates: The interest rate environment has shifted dramatically from the 2010s. Although the Federal Reserve cut rates in late 2024 (bringing the benchmark down to ~4.5% by year-end) as inflation eased, borrowing costs remain significantly higher than a couple of years ago. Higher long-term Treasury yields mean higher mortgage rates, which reduce loan proceeds and debt service coverage for the same properties. Many borrowers extended loans instead of refinancing in 2024, kicking the can into 2025. Now, a wall of maturities has arrived, with an estimated $957 billion in CRE loans maturing in 2025. Banks cannot refinance all of these, especially as 40% of 2025’s maturities were loans already extended from prior years The result is a capital crunch for refinancing and new deals.
  
  

• Sunbelt Growth vs. Capital Supply: Texas and Sunbelt cities are experiencing booming demand. Dallas was ranked the #1 U.S. real estate market for 2025, with Miami, Houston, and Atlanta also in the top five, driven by population and job growth. Dallas saw an 11% employment jump since 2020, and Austin grew jobs ~17.5%, among the fastest in the nation. Paradoxically, this growth means more projects and transactions requiring financing, just as traditional lenders have less capacity. The Sunbelt’s success has outpaced the ability of cautious banks to finance it.

Market Stat: Nearly $583 billion in new CRE loans is projected for 2025 (up 16% from 2024), but that’s still far short of the $957B coming due. The shortfall illustrates the financing gap that private lenders are stepping up to fill.

How Private Lenders are Filling the Void

In this high-demand, tight-credit environment, private CRE lenders (debt funds, mortgage REITs, family offices, and other non-bank financiers) are acting as a crucial pressure relief valve. They are providing liquidity and flexibility that borrowers can’t find at banks:

• Rapid Growth of Private Credit: Once a niche “alternative,” private credit has gone mainstream. Private real estate debt funds and lenders now manage roughly $1.7 trillion in assets, and this could double to $3.4T by 2030 at current growth rates. In the first weeks of 2025 alone, private lenders originated $4.43B in short-term CRE loans, surpassing the previous year’s Q1 pace. Non-bank lenders’ share of the overall CRE lending pie has swelled dramatically (one analysis noted a 1000% increase in private credit’s market share since 2009). This influx of private capital is bridging the funding gap, providing financing when traditional sources won’t.
  
  

• Flexible, Deal-Oriented Underwriting: Unlike heavily regulated banks, private lenders can underwrite based on the property’s potential and the sponsor’s plan rather than rigid checkboxes. They often accept more risk (higher LTVs, transitional assets, etc.) in exchange for higher returns. As one industry source notes, debt funds and non-banks have stepped in “where banks have pulled back due to regulatory constraints or internal risk limits". A Houston-based private credit fund can look at a value-add apartment deal or a partially leased retail center and craft a loan that makes sense today, whereas a bank might reject it outright. This agility allows creative financing structures (bridge loans, mezzanine debt, preferred equity) that get deals done.
  
  

• Execution Certainty and Speed: In fast-moving markets like Texas, speed and certainty of closing are paramount. Here private lenders really shine. They can often close a commercial loan in weeks instead of months, avoiding the extended timelines of bank loans. (Most banks and CMBS lenders take at least 3 to 4 months to close a CRE loan.) Private lenders frequently have more streamlined due diligence – for instance, they may use internal valuation experts and skip some red tape. This means borrowers and brokers get the “execution certainty” they need: confidence that the loan will fund on schedule, enabling them to seize opportunities (such as a discounted property purchase or time-sensitive refinance).

These advantages explain why brokers, sponsors, and even banks themselves are increasingly working with private lenders in 2025. Some banks have formed “frenemy” partnerships – referring clients to debt funds or co-lending – to fill gaps they can’t cover. The result is that critical projects in Texas and the broader Sunbelt are still getting financed, albeit at higher interest costs, thanks to private capital stepping in.

Trends and Case Examples in Texas Markets

Texas exemplifies the national trend. Consider the scenario of a Houston real estate development in 2025: A sponsor owns a partially built mixed-use project that stalled when their bank halted future funding. With a big tenant signed, the project is viable – but needs a $10 million infusion to finish construction. Traditional banks shy away due to the project’s earlier hiccups and cost overruns. Enter a private bridge lender: they evaluate the real value of the pre-leased space, the strong Houston economy, and provide a 18-month bridge loan to complete the project. The lender can move quickly, where a bank’s committee might have deliberated for months as the construction site sat idle.

Such stories are increasingly common:

• Value-Add Apartment in Dallas: A Dallas investor finds a 1980s apartment complex with below-market rents (classic value-add play). A bank offers only 60% loan-to-cost due to conservative appraisals, leaving a big equity gap. A private credit fund steps in with a short-term CRE financing package: a 75% LTC bridge loan that funds acquisition and renovation, confident that Dallas’s rent growth and tight vacancy (projected 4.9% vacancy rate for multifamily in 2025) will allow a refinance or sale at profit. The deal closes in 30 days – impossible with bank financing – allowing the investor to quickly capitalize on the opportunity.
  
  

• Refinance Relief in Austin: Dozens of Austin office owners face loan maturities in 2025 while values are still recovering. Rather than foreclose, some banks are willing to sell these loan notes at a discount to private buyers. Private lenders purchase the notes (or make new loans at a lower principal balance) providing banks relief and giving the property owner a second chance with restructured debt. This note sale approach, discussed more in a later article, is another way private capital is smoothing the rough edges of the market.

These examples highlight a theme: private lenders providing capital availability for commercial real estate when and where it’s needed, keeping the wheels of Texas’s real estate economy turning. Borrowers may pay a premium in interest (often in the 8–12% range for private money vs. 5–7% bank rates), but without these alternative loans many deals simply wouldn’t happen.

Outlook: Private Credit’s Growing Role in the Sunbelt

Looking ahead to late 2025 and into 2026, expect private lenders to maintain or expand their role in high-growth markets:

• Deal Flow Rebounds: Industry projections suggest that CRE sales and financing volumes will pick up by Q3/Q4 2025 as price discovery brings buyers and sellers closer. With the logjam of “extend-and-pretend” loans finally breaking, more properties will transact and require new financing. Private capital is poised to fund a significant share of these deals. In fact, market watchers predict transaction volumes to increase materially in late 2025 as capital from private sources fills in.

  
  

• Continued Bank Caution: Banks will likely remain selective. Even as interest rates stabilize or edge down, new regulations and capital requirements may keep traditional lenders on the sidelines for anything but the lowest-risk projects. Traditional lenders will stay constrained with limited balance sheet capacity, further pushing borrowers toward private credit.
  
  

• Sunbelt Strength: Markets like Houston, Dallas, Atlanta, Phoenix, and Miami should continue attracting investment due to population and employment growth. This demand for real estate will ensure demand for financing. Private lenders with local market knowledge (for example, a Houston real estate lender that understands the energy sector’s impact on office occupancy, or a Phoenix debt fund attuned to industrial growth) will have an edge in underwriting deals that national banks might misjudge.

In summary, 2025’s higher interest rates and cautious banks have created a capital gap in commercial real estate – but Texas and Sunbelt dealmakers are finding solutions in the form of nimble private lenders. These non-bank financiers are ensuring that viable projects can still secure the funding they need, offering bridge loans in Texas, fast commercial loans, and creative financing to keep the momentum going. For brokers and sponsors in the region, tapping into this private capital is becoming not just an option but a necessity to get deals across the finish line.

Conclusion and Call to Action

The CRE funding landscape has shifted, but with change comes opportunity. Private credit funds and alternative lenders are now essential partners in markets like Texas. Brokers and borrowers who understand how to leverage these relationships can turn 2025’s challenges into successful closings. C2R Capital, as a non-bank private credit lender with proven execution certainty, is part of this new solution set. Don’t let a bank’s “no” kill your deal – explore how private financing can fill the gap. Contact C2R Capital to discuss your commercial financing needs, whether it’s a bridge loan for a value-add multifamily in Dallas or a creative refinance on a Houston office. In today’s market, the fastest and most flexible capital wins.