Risks and benefits of investing in real estate



After a hectic year caused by the pandemic, the real estate market is showing some signs of recovery, albeit slowly, with sharp differences between sectors.

Overall: In 2020, aggregate capital raised by private real estate funds focused on North America fell 26 percent from 2019, according to a Preqin report on US real estate markets released Monday. Data compiled as of April 2021 showed that the total value of real estate transactions with private equity was equivalent to nearly 30 percent of last year’s amount; although, according to the report, there may be an increase in the second half of the year.

The country’s residential real estate sector has been the most active this year, with deals totaling $ 17 billion in the first four months of 2021 – due in part to a shift towards telecommuting with people migrating to warmer, less expensive cities. Emerging trends in home-based work, including the shift to less urban areas, “are already shaping investor demand and city ratings in terms of invested capital.” Some pension funds have already increased target placement of real estate Last year.

As companies introduce hybrid work options where employees can work from home for part of the week, flexible working can still influence location decisions. According to the report, a possible return to the office will require less space and therefore generate less demand for office property. In 2020, there were 744 private equity transactions in office real estate, down 49 percent from 1,465 transactions in 2019. In the first four months of 2021, only 204 transactions were concluded. The tied fund figure was even gloomier: “No fund focused on US offices closed in 2021,” the report said. “By comparison, eight office funds closed in 2020.”


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