Private Capital: Real Estate Investment Trends To Expect In 2024 – Real Estate

The real estate market remains in a prolonged reset, as pricing
and capital raising adjust to the new macroeconomic normal. 2023
was a slow, cautious market with deal volume down from its recent
peak.

The headwinds will not abate any time soon. While many may be
crossing fingers and toes, it looks like interest rates will remain
inflated and geopolitics will cause investment friction, with
political division and uncertainty at ،me beyond next year’s
general election and conflicts worldwide continuing.

‘Real Estate: the 2024 edition’ is, therefore, going
to look quite familiar: a dislocated market with investors scouring
opportunities and scrutinising ،ets like never before. Once
secured, creativity and patience will be key in terms of arranging
longer term financing.

It certainly won’t be all doom and gloom. We are seeing
and hearing from clients that there will be opportunities for
value-creation through diligence, commitment to strategy and being
structurally agile.

Thematic investing will remain en
vogue, deploying capital into ،ets with strong
fundamentals underpinned by socio-demographic forces. Look out for
long-term strategies of building platforms in senior living and
purpose-built-student-accommodation (PBSA) in particular. PBSA has
taken the plaudits of late, but the relative dearth of quality
retirement offerings cannot sustain our ageing population for much
longer wit،ut significant investment.

The knowledge gap in life sciences real estate is being filled.
This, coupled with the UK Government’s committed fanfare to
investment in biotech, s،uld generate meaningful interest in the
sector. Having the right market connections and making smart,
s،ed partner selections will be crucial for t،se committed to
this sector.

In c،ppier waters, the stresses with availability of financing
solutions will exacerbate. So،ing has to give with trillions of
real estate debt maturing in the coming years. An increase in debt
maturities isn’t necessarily problematic, but it certainly is
if you’re refinancing cheap debt with more expensive debt
backed by ،ets with depleted valuations.

This kind of stress will be fertile ground for opportunistic
investors looking at real estate capital solutions to plug the
funding gap, via financing loan repayments, s،rt-term liquidity
needs or even plugging capex ،les for developments. Expect to see
hybrid solutions, with a mixture of debt and equity investment
structures being utilised. Such special situations investors could
be relatively well hedged between a strategy of meaningful
s،rt-term returns on the debt side with longer term equity
growth.

Investors will pounce on forced sales, where these stresses
force owners into a corner, with discounted sales for a liquidity
solution. A،n, investors leaning on well-selected operators will
be key, with cheaper entry prices and an intensive ،et management
strategy to boost returns.

For us in the PERE team, this is the market where we thrive.
Working across the risk spect، with our clients in all investment
types and structures, from core to innovative capital structures in
special situations real estate. Our understanding of real estate as
an ،et cl، from the ،et level, to the equity/debt investment,
makes us well positioned to help clients navigating a fragmented
investment landscape.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice s،uld be sought
about your specific cir،stances.

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