Private capital surge sparks contest in debt markets

Australian real estate is coming up trumps for lenders, with private capital also shaking up the market.

Demand for lending to build-to-sell projects is picking up.

Rising global uncertainty has failed to dent lender appetite for Australian investment opportunities, according to real estate agency CBRE.

The firm tapped a mix of 34 local and international banks and non-bank lenders for its latest sentiment survey and found appetite for new loans had remained relatively unchanged.

Despite global ructions, 56 per cent of lenders wanted to grow their commercial real estate exposures and no surveyed lenders intending to decrease their books.

“The domestic banks sit on strong balance sheets and there has been a significant amount of capital raised in the private credit sector. This is underpinning competitive tension and strong appetite for lending to quality assets and sponsors,” CBRE managing director of debt and structured finance Andrew McCasker said.

The survey revealed that lenders were also continuing to favour Australia’s industrial and logistics sector – by a considerable margin – despite weakening fundamentals in recent months.

The residential sector is also in favour, with interest in build-to-sell surging and interest in build-to-rent also holding up.

But the preference for data centres has cooled from last year’s highs in the wake of Blackstone’s $24bn AirTrunk acquisition.

There was also continued caution among local lenders when it came to the office sector, with repositioning opportunities outranking stabilised office assets.

CBRE debt and structured finance director Will Edwards said amid the caution in the office sector, “We are seeing lenders take a considered approach to the sector reflective of flight to quality in the asset class”.

“For Prime and A-grade assets in core locations, lenders will price aggressively for the exposure,” he said.

While Australia’s cash rate cutting cycle is firmly under way, local pundits and lenders are the most divided they’ve been in years as to what the terminal rate for this cycle will be.

More than half of the surveyed lenders expect two additional rate cuts over the remainder of 2025, but there is no majority viewpoint on the cash rate as of June 2026.

The upcoming RBA decision this month is expected to give more clarity on the rate-cutting cycle.

Originally published as Private capital surge sparks contest in debt markets