From risk to advantage: rethinking servicing in real estate private credit

The private credit boom of the last 10 years shows no sign of slowing, particularly in the commercial real estate (CRE) sector. EY estimates that there is $A76 billion of CRE private credit currently outstanding in Australia. While the growth has been strong, private credit accounts for just 16% of Australia’s $A447 billion CRE credit market (compared to 60% in the US), allowing significant room for growth. 

But as lenders scale rapidly, many are experiencing pressure in unexpected places, particularly in servicing. Many participants in the market have seen their books double, triple or more over the last five years and this has put significant strain on back-office systems and operations. This can result in a ‘servicing risk’ that impacts all parts of the business. 

From data entry errors and system failures to spreadsheet glitches and process breakdowns, , operational missteps in a high growth environment can lead to serious consequences including poor credit risk oversight, incorrect reporting, unhappy borrowers and investors, fraud risk, reputational damage, management stress and, ultimately, financial loss. 

At the same time, regulators are watching closely. ASIC is currently conducting a thematic surveillance of retail-focused private credit funds and plans to release updates before the end of 2025. This is playing out in media headlines, and reflects growing scrutiny around investor protections, borrower transparency and operational robustness.  

For CRE lenders, especially those dealing with complex loan structures or non-standard documentation, this scrutiny brings additional challenges. Unlike traditional lending, private credit rarely seldom conforms to standardised templates or enterprise systems. It demands extensive customisation to accommodate complex loan structures, which is both time consuming and costly. That complexity, coupled with rapid growth, is elevating operational risk to a core strategic concern.   

The good news is that servicing risk is increasingly being recognised not just as an operational issue, but a strategic one.

Leading lenders are starting to:  

       – Map and stress-test their servicing functions 

       – Review manual processes and legacy systems for scalability 

       – Invest in risk management and compliance frameworks to meet regulatory expectations 

       – Consider specialist partners or platforms that can scale with them. 

Private credit’s momentum is unlikely to slow. Those who meet the servicing challenge head-on are turning it into a competitive advantage, freeing up time and resources to focus on their clients, pursue new lending opportunities and drive sustainable growth.  

As the market matures and regulatory scrutiny intensifies, strengthening servicing capability isn’t just about reducing risk, it’s about building resilience and enabling performance.