- Private equity firms have US$328 billion cash to deploy for global real estate investment, according to Preqin data
- Sellers are only willing to offer discounts of 5 per cent while buyers are hoping for about 20 per cent concession
The world’s biggest real estate investors are sitting on piles of cash, preparing for once-in-a-lifetime opportunities created by the pandemic.
With economies around the world sputtering, commercial real estate prices are expected to come down. How much they will fall is the key question.
Sellers are currently willing to concede discounts of around 5 per cent, while bidders are hoping for about 20 per cent off pre-pandemic prices, said Charles Hewlett, managing director at Rclco Real Estate Advisors. That estimated gap, which is likely wider in specific cases, has put a freeze on deals.
“The mantra for anything that has not got started is: delay, defer and, in many cases, renegotiate,” Hewlett said. “If I’m going to have vintage May 2020 on my books, I want to be able to demonstrate to my investors that I got an exceptionally good deal.”
Private equity firms across the globe hold an estimated US$328 billion in dry powder for real estate deployment, according to the data firm Preqin.
Before the crisis, asset prices had been pushed up as investors chased yield in riskier corners of the property market. Now, Blackstone Group and Brookfield Asset Management, the largest real estate investing companies, are expected to hunt for bargains.
Social distancing rules and a virtual travel halt have stalled transactions and led to speculation that prices will drop in coming months.