C-PACE Lending Surges as State Programs Expand Nationwide

C-PACE Breaks Records on Loan Size and Use

Lenders are setting new C-PACE benchmarks, with NGC closing a $465M loan for Post Brothers’ D.C. office-to-multifamily conversion in January 2026, following a $290M loan for the Pendry Hotel in Tampa just months earlier, per Commercial Observer.

C-PACE, which adds a fixed-rate, long-term assessment to property tax bills, is scaling rapidly beyond green retrofits as developers and owners tap it for new construction, refinancing, and credit enhancement amid stubbornly high interest rates. PACENation reported a record $2.42B C-PACE originations across 214 deals in 2024, with cumulative volume surpassing $10B entering 2026.

From Sustainability Upgrades to Core Refinancing

C-PACE financing typically provides long-term, fixed-rate funding through a special assessment attached to a property’s tax bill. Early transactions largely focused on rooftop solar installations and energy-efficiency retrofits, but the product’s role has expanded considerably.

According to Nuveen Green Capital CEO Alexandra Cooley, sustainability and resiliency initiatives now account for more than 95% of the firm’s financings, up from less than 50% in 2015. At the same time, borrowers increasingly use C-PACE as a capital stack enhancement, particularly for construction projects, refinancings, and recapitalizations.

The shift reflects changing market conditions. Higher interest rates and prolonged loan extensions have pressured property owners to find new sources of capital. In some cases, C-PACE financing can represent up to 45% of a project’s capital stack, making it an increasingly important tool for sponsors navigating tighter credit markets.

Senior Lender Acceptance Spurs Growth

C-PACE’s appeal is rising in a capital-tight, high-rate environment. Borrowers now use C-PACE for up to 45% of the capital stack on some deals, as banks grow more comfortable consenting to these assessments, especially for construction or refinancing risk reduction. Retroactive C-PACE is being used as quasi-rescue capital. Peachtree’s $176.5M retroactive loan for Dreamscape’s Rio Hotel & Casino in Las Vegas (closed August 2025) provided crucial stabilization funding after renovations, demonstrating the strategy’s expanding role.

Program Expansion and Regulatory Adjustments Accelerate Adoption

As of 2026, 40 states and D.C. have C-PACE legislation, and 32 have active programs—up from just six in 2015, according to PACENation. Recent state entries include New Jersey, North Carolina, Idaho, and Hawaii. New York City expanded eligibility to include gut rehabs and embodied carbon, making more projects financeable. Brooklyn’s Echelon Studios secured a $156M financing package using updated new-construction provisions under NYC law.

Why It Matters

C-PACE is filling critical capital gaps for CRE borrowers facing refinancing cliffs and construction headwinds. Traditional financing sources remain selective, particularly for transitional assets and large redevelopment projects. As a result, sponsors are increasingly combining senior debt with alternative capital sources to close funding gaps.

Equally important, senior lenders appear far more willing to work alongside C-PACE providers than they were several years ago. Industry executives from Peachtree Group and CounterpointeSRE cited growing acceptance among banks and institutional lenders, noting that the structure can reduce overall risk exposure while improving project economics for borrowers.

The industry’s geographic expansion reinforces that momentum. According to PACENation, 40 states and Washington, DC, have enacted C-PACE legislation, while 32 states currently maintain active programs, up from just six in 2015. New programs launched in New Jersey, North Carolina, Idaho, and Hawaii during 2025, creating additional markets for future growth.

The combination of regulatory support, lender acceptance, and borrower demand suggests C-PACE is becoming a more permanent fixture within commercial real estate finance rather than a specialized niche product.

What’s Next

Watch for C-PACE origination to outpace previous years as new state and municipal programs mature. Regulatory changes, including embodied carbon eligibility, should increase financing volume across more commercial real estate projects. Expanded rules for retroactive deals may further boost adoption, especially in cities converting underperforming office buildings.

Petros PACE Finance paused activity due to sponsor reevaluation, not weakening market demand. Competition among active lenders is expected to remain strong. States and localities continue refining C-PACE frameworks to support broader usage. New structures, including delayed-draw financing and senior loan stacking, could further expand adoption.