Real Estate Market on the Rebound: But Regulatory Changes Could Impact Depth and Speed of Recovery
The recession, financial crisis, pullback in the credit markets, and high-profile fraud cases, such as the Bernie Madoff scandal, took a toll on real estate private equity over the past few years, causing the market to shrink to about a third of its 2007 peak based on total capital commitments. There are now signs the sector is reaching the bottom, and fund managers should brace themselves for an acceleration of deals and financing activity to hit the sector over the next several years. However, certain regulatory and accounting changes will call for a different approach, other than business as usual.
Global deal activity of $582 billion in 2010 was up 44 percent over the prior year, but it still represents only half of the market peak in 2007, and the availability of debt financing based on global commercial mortgage–backed securities volume, while up 67 percent year to date, is still off 90 percent from levels prior to the financial crisis. But activity has picked up in t