In Contrast to Property Acquisitions, Real Estate Debt Investing Rises
Although remaining on the sidelines to purchase property, investors are pouring capital into funds that finance property deals or buying existing loans at a time when real estate debt posted the strongest quarter-on-quarter growth. According to reported figures from London-based investment data company Preqin, the dollar volume of real estate debt investment surged from $2.3 billion in the 1st quarter to $9.1 billion in the 2nd quarter. In contrast, “overall real estate capital raising for equity investments or taking ownership of properties saw only a modest increase quarter-over-quarter of about 1.9%, reaching $33 billion in the 2nd quarter. Robust activity has resulted in major private equity firms reporting a rebound in “raising capital across most of their investing strategies, with commercial real estate loans collecting the most by far to fill the void as banks reduce property financing.” Since the process is anticipated to take much longer than what people expect when a lowering of interest rates by the Federal Reserve kicks-off, it is likely that debt investing will continue to hold onto its appeal. Despite the continued lag in raising capital among funds that invest in buying property, there has been an uptick in activity. Cited in example was the $3.4 billion that the Carlyle Group raised in the 2nd quarter, making it the best real estate fundraising by the firm since the 3rd quarter of 2021.