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Alternative Market Briefing

Private equity real estate grows from strength to strength but turbulent months seen ahead

Friday, May 17, 2019

Laxman Pai, Opalesque Asia:

The private equity real estate (PERE) industry reached a record $900bn in assets under management as of June 2018, marking a new high for a sector that has grown from strength to strength in recent years, said Preqin.

Fundraising has remained strong, deal making is at record levels and investor appetite is high. Looking ahead, fund managers are optimistic about the future of the industry, and there are a record number of funds seeking capital.

But there are serious challenges ahead: high asset pricing is putting pressure on future return prospects, and both fund managers and investors foresee a market correction in the coming months. This suggests that the months ahead will be turbulent for PERE fund managers, and may help explain why investors are increasingly looking to commit to large, established fund managers over smaller firms.

As the fundraising and deals markets continue to bifurcate, the industry is likely to become even more difficult to navigate for both parties.

"Private real estate is in a period of adjustment. High valuations and rising interest rates will continue to be key challenges for the industry in 2019. While investors generally plan to allocate more capital than ever before, it seems likely that fundraising will become an even more challenging prospect for many managers as competition continues to intensify," said Tom Carr, Head of Real Estate.

"In response to this, many fund managers are......................

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