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CRE Private-Equity Fundraising Tumbles Under Pandemic

August 11, 2020, 09:00 AM
Filed Under: Real Estate

The COVID-19 pandemic has hit the North American commercial real estate market hard according to a report from Preqin. Private equity real estate (PERE) fundraising reached a peak in 2019, as funds secured $83 billion, and seemed to be set to match that in 2020.

But as of June, just $23 billon has been raised for the sector. Deal-making has also declined, from over 3,600 deals made in 2019 to less than a thousand in the first half of 2020. The retail and hospitality sectors have been most severely impacted, as these properties have been most exposed to the economic slowdown, but office and industrial activity has also declined. Looking forward, though, the market is ready to return to action. US commercial real estate dry powder stands at a record $147 billion (as of December 2019), with fund managers poised to return to the market as it emerges from this crisis.

“As consumers and businesses adapt to enforced distancing and lockdown measures, the way in which Americans use commercial property has abruptly changed. This has accelerated longer-term trends, like the rise of ecommerce, that have seen bricks-and-mortar retail and hospitality assets become less sought-after in favor of industrial assets," said Christopher Beales, Real Estate Spokesperson. "However, the commercial real estate market in North America is still growing, and fund managers have a lot of dry powder to spend. As new ways of life arise, new opportunities will come to the market. The challenge for managers will be to gauge what the next 10 years of working, shopping and holidaying will look like.”

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