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Hoping to take advantage of wreckage in the wake of the coronavirus pandemic, investors are preparing to snap up commercial real estate at rock-bottom prices.
Long before states and cities closed businesses and issued stay-at-home orders, many real estate funds were stockpiling cash and waiting for a buyer’s market. Some have raised billions of dollars in the last several weeks.
As a result, Blackstone Group, Kayne Anderson Capital Advisors, Starwood Capital Group and other investment firms are sitting on roughly $300 billion of equity ready for deployment, said Douglas M. Weill, a founder of Hodes Weill & Associates, a global real estate capital advisory firm in New York. By comparison, property sales totaled $570.6 billion in 2019, according to Real Capital Analytics, a commercial real estate researcher that tracks deals of $2.5 million and up.
“It’s a staggering amount of dry powder,” Weill said. “Institutional investors are defensively looking after their own portfolios, but they’re beginning to look around for opportunities.”
This is the second time in the last dozen years that investors have anticipated an onslaught of big property discounts; the 2008 financial crisis also fueled a surge of distressed funds. Yet many that ramped up during the Great Recession fizzled because the expected depth and breadth of distress never materialized.
Will this time be different? Just like the last crisis, when government intervention, loan