Private investors squeezing out pension funds

Pension funds snapping up commercial real estate space are under pressure from individual property owners wanting a slice of the market.

More investors are making the move to commercial real estate and they are squeezing the big guns out of the market.

According to CBRE, a lot of the deals in the second quarter of the year were driven by smaller deals. The size of such deals would not attract the large institutional players, according to real estate experts.

While the number of transactions during this period increased by 9.7 per cent during this period, the dollar volume of investment activity dropped sharply.

The total value of commercial real estate was $5.1 billion, down from $6.7 billion in the first quarter.

“Volume came off a bit in the second quarter but more deals were processed and the lack of summer lull bodes well for the remainder of the year,” says John O’Bryan, chairman of CBRE, Canada.

Private investors purchased 61.6 per cent of real estate, up from 39.6 per cent in the first quarter. Pension funds only accounted for 11.4 while REITs made up 8.7 per cent in the second quarter.

“You have to think that the REITs are near the bottom in terms of purchasing activity. I would expect REITs will be more activity going forward,” says Ross Moore, director of research with CBRE.

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