A new analysis by Savills suggests that approximately US$500 billion in real estate assets, currently held by closed-ended equity funds, could re-enter the global market over the next few years. This is due to funds nearing their exit period, which could drive a significant surge in property sales and investment activity.
Savills examined the assets acquired by equity funds and investment managers in 2018 and 2019. By comparing the typical five-year hold period with the volume of asset disposals in 2023 and 2024, the firm estimates that around US$500 billion in sales have been delayed over the past two years. With market liquidity and values recovering, the firm expects funds to start bringing these assets to market, creating a wave of transactional activity.
Many funds delayed asset disposals during the challenging market conditions of 2023 and 2024, fearing that selling at the market’s low point would lock in losses for investors. However, as market conditions improve, Savills anticipates a rise in asset disposals and fund exits, which will inject capital back into the market. The firm believes that stable institutional allocations will support the recycling of capital and, in turn, aid in the recovery of real estate fundraising, resulting in an increase in transactions through 2025 and beyond.
Rasheed Hassan, Global Head of Cross-Border Investment at Savills, commented, “The recycling of up to US$500 billion in assets as the market recovers will play a crucial role in boosting market liquidity in the coming years. In several markets, activity has been subdued not due to a lack of buyers, but because of a shortage of available assets. Once these assets become available, we expect competitive bidding, as we’ve already seen growing momentum in buyer activity by Q4 2024, with both cross-border and domestic institutional investors increasing their real estate investments.”
Oliver Salmon, Director of Capital Markets at Savills World Research, added, “In typical market conditions, real estate fundraising usually drives deal activity. However, this cycle presents a different scenario. The increase in transactional activity isn’t contingent on new fundraising efforts. Instead, there’s an abundance of capital available to support more deals, and we are starting to see this manifest. With institutional allocations largely stable, it’s the recycling of capital through transactions that will ultimately fuel new fundraising commitments.”
As these assets begin to be recycled into the market, the real estate sector is poised for a recovery, with substantial investment opportunities on the horizon.
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