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  • Writer's pictureKyle Nagy

Private Capital vs. Institutional Money

Property sales valued at $5 million to $25 million continued to hold up better than the institutional marketplace in 2022. What does this mean for Commercial Real Estate Investors and Professionals?

“Some $90.4 billion of private-capital sales closed in 2022, up 7.7% from $83.9 billion in the prior year. The tally is 65.2% higher than the $54.7 billion of smaller sales recorded in 2019, the first year Real Estate Alert surveyed the private-capital space.

When starting CommCap, we were told it would be better to join a larger national firm because institutional owners will push out small developers and owners. For those CRE professionals at boutique firms or are new to the business, trends look positive. For the smaller CRE Developer and Owner, you will continue to have opportunities.

"By comparison, the $25 million-and-over market was down 21.5% year over year and just 25.8% higher than three years ago.”

Where were the biggest growth areas?

"Two reasons for private-capital sales (growth) were hotels and retail. Sales were respectively up 58.5% and 30.4%. “And the office, multifamily, and industrial sectors performed better than their institutional counterparts.”

Good news for the smaller developer. Any trends to consider?

"The breakouts by property type shifted a bit between 2021 and 2022. For example, self-storage grew from 3% to 4% of the total, and retail went from 20% to 24%. However, multifamily dropped 200 basis points from 30% to 28% and industrial — the other darling during the heavy days of the pandemic — fell from 25% to 21%."

Perhaps, multifamily and industrial traded more often earlier in the cycle and buyers moved into higher cap rate property types. How did the 4th quarter slowdown affect transaction volumes?

“The fourth quarter saw just $20.5 billion of trades close, down 36% from the 2021 peak of $32 billion. But compare that with the institutional space, where fourth-quarter sales sank 69% year over year.”

What can we expect (or hope for) moving forward?

"It was and still is an opportune time for private capital. Assets in the second half of the year could be had for less than in the first half. And with less competition from institutional capital, private capital groups that might normally look at the property value range of $5 million to $25 million can stretch and consider $40 million to $60 million."

Time to grow with your clients and for a smaller owner\investor to grow their pie.

Contributed by Kyle Nagy, President


As your exclusive advisors, CommCap utilizes proprietary systems, market expertise, and years of experience to secure aggressive financing options that best fit your property. Exclusive correspondent and servicing relationships with Life Insurance Company, CMBS, and Agency lenders ensure a broad and in-depth representation of current market conditions. Our team of advisors craft a loan structured to enhance revenue and allow you to focus on increasing cash flow.

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