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Advanced Investing

Institutional Investors are Driving Down Rates in the Real Estate Industry

Colony Capital, BlackRock, Fortress, Apollo are just a few of the many institutional investors that are capitalizing on today’s real estate investment opportunities. As a result, these large corporations have driven down industry rates. Thus, making the real estate space even more competitive.

As Craig Cecilio, Founder of DiversyFund says, “It’s was inevitable that this was going to happen during a great market.” And, goes on to say, “I predicted this was going to happen back in 2011 as the market started to heat up again. In coming years, we will continue to see the cost of capital become more and more competitive.”

The Institutional Investor Shift

If we are comparing 2007-2008 to today, the market is quite different, in a good way. There’s not one singular way to structure a real estate debt and equity investment anymore. “We are continuing to create new equity products every day,” mentioned Craig Cecilio. “Creativity is the driver of the industry right now. Therefore, whoever is putting together the most creative products will be leading with a competitive edge.”

Since institutional investors are already capitalizing on debt real estate products, they’ll likely continue to seek these returns. For retail investors still enjoying the double digit returns that these debt products are offering, they may find in the next few years that double digit returns will lower to single digits. Fortunately enough, equity products are becoming more popular for retail investors and these high yield returns are still there…for now.

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