Private Equity and the Real Estate Market

After a few years in recession and with many people in the private equity industry wondering when it’ll happen, finally the real estate market is being approached by the private equity industry again. It’s been a long time coming but according to a news report from EY and after speaking to private equity firm Charterhouse Capital Partners for confirmation on the story, real estate in the private equity area looks set to grow and continue to grow this year.

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Lets not get too ahead of ourselves here though. Whilst some our smiling with the news, others are watching with interest because many are wondering if this growth is indeed for the long haul and not just a small spike in the market.  When it comes to the top real estate private equity companies, the top 10 or 15 or so become a very attractive investment to almost 50% of the potential investment capital. These inevitably leaves the other 500 or so funds fighting amongst themselves for the remaining 50% which as you can imagine leads to fierce competition. What it also means is that the investors have a lot of power when allocations are looked at.

All over the world this trend is continuing with private equity investors in the United States flipping real estate with a very short turnaround. Many firms have also gotten involved by funding and backing the project that enables an even faster turnaround with quicker profits being received by the investing parties.

It remains to be seen whether this spike will continue, plateau or fall. One thing is for certain, the rest of the year will be interesting to watch!