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Investors Shift From Equity To Debt As Commercial Valuations Continue To Rise


As commercial valuations continue to rise, big investors are increasingly turing to commercial lending as a safer bet in today's market.

The commercial real estate market is into its eighth year of rising prices, and large investors like Kentucky’s $16B pension fund are shifting investments into funds that lend rather than those that own, the Wall Street Journal reports. Most investors consider debt a less risky investment than equity because they can foreclose if values drop and will likely preserve their principal.

Blackstone Group and KKR, among other huge real estate fund managers, closed or started debt funds within the last year, and the trend is gaining momentum. Preqin said debt funds raised $20.4B in 2016, up from $12.2B the year before.