Trends in real estate private equity

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The real estate private equity funds sector is facing a period of significant structural and cultural change, with cautious investors, large-scale regulatory overhauls and the ongoing liquidity of the capital markets all driving the change.

Difficulty fund-raising, increased business costs and widespread market consolidation will continue to claim casualties in the funds sector.

Considering the impact of these factors, the emerging environment for funds is not for the faint of heart.

To better understand the market, we surveyed more than 300 real estate private equity managers on 11 questions covering many subjects, including capital markets, financial and performance reporting and taxes.

Persisting volatility in the financial markets means that the real estate fund sector will continue to face some level of uncertainty for the foreseeable future.

This means it is not immune to the individual symptoms that draw so much attention, and indeed, it will need to become even more adept at adjusting to them. The solution is not in treating these one-off shocks, however; the solution lies in focusing on long-term growth.

Naturally, not all businesses will emerge on the other end of this transitional period unscathed. Difficulty fund-raising, increased business costs and widespread market consolidation will continue to claim casualties in the funds sector.

But this corrective phase is necessary for the sector’s overall quality and credibility, purging excessively risky and poorly run players from the market, rewarding those able to bring creative solutions to the recovery process, and helping to rebuild investor confidence in the real estate fund space over the long term.

Howard Roth

Howard Roth
Global Real Estate Leader
EY

Mark Grinis

Mark Grinis
Global Real Estate Fund Leader
EY