June 10, 2019 by Benjamin Paltiel
A BISNOW FEATURED SERIES:
New York Equity Raising
April 29, 2019 by Miriam Hall
Bisnow Survey: It Is Getting Harder To Raise And Spend Equity
Photo:
Aidan Bartos, Unsplash
Despite a strong economy and historically low unemployment, investors are concerned that deals are getting harder to find and that a downturn may be approaching.
Bisnow polled 61 equity-raising professionals on how the state of equity-raising and deal-making has changed over the last year. While results were mixed across the board, the survey revealed concerns that the market has become more challenging for both raising and spending equity.
The largest share of respondents, 51%, said that finding attractive investments has become harder in the last year. In comparison, only 15% said that it has become easier to find quality deals.
As large firms with enormous amounts of capital compete for the best deals in primary markets, smaller funds are looking elsewhere to deploy their assets. A substantial 62% of respondents said they have been investing more in tertiary markets in the last year.
Fund managers are also diversifying into alternative asset classes to find returns. Co-living, student housing, senior housing and single-family rentals have all become popular alternatives to traditional multifamily and office investments.
Meanwhile, professionals' responses on the state of equity-raising itself were mixed. The plurality of respondents, 39%, said that raising equity has become harder compared to the middle of the cycle. However, 18% said that raising equity has become easier in the last year.
Despite widespread concerns about the economy, most respondents said that negative economic indicators have not affected their equity-raising strategies.
A full 79% of respondents said that rising interest rates have not affected their approach to raising equity. Similarly, 62% said that recent yield curve inversions have had no impact on their capital-raising efforts.
When it comes to potential economic downturns, the majority of respondents, 59%, said they have discussed the possibility with their partners but haven't changed their outlook as a result. Only 19% said they are actively adjusting their strategy to prepare for the end of the cycle.
On a more local level, upcoming changes to rent regulation in New York have dominated headlines in the commercial real estate industry. However, 75% of respondents said that pending legislation has not impacted their ability to raise capital.
The results suggest that while equity-raising professionals are aware of the challenges and risks in today's market, most are continuing with business as usual for the time being.
This feature was produced in collaboration between Bisnow Branded Content and RSM. Bisnow news staff was not involved in the production of this content.
More in this series:
April 22, 2019 by Miriam Hall
War Chests: The Biggest Global Real Estate Funds Closed Since 2015
April 17, 2019 by Miriam Hall
All Raised Up And Nowhere To Go: Equity Funds Grow As Good Deals Shrink
April 4, 2019 by Miriam Hall