The Azucena Take: The Rise of Private Investors in Commercial Real Estate

money_stockphoto.jpeg

The face of investment real estate has changed a lot in the last few years. Once dominated by financial and commercial institutions, the new leaders of the market are the private investors.

In 2011: private investors made up 29% of commercial property investors. Meanwhile, institutions like investment firms (31%) and REITA (25%) combined made up the majority. However, the number of private investors started to rise and by 2021 they make up 55% of commercial property investors. At the same time, institutions have lost their dominance.

Screenshot 2021-05-03 10.04.10.png

Controlling 55% of the commercial real estate market is already impressive but the dominance of private investors is not truly realized until the numbers are broken down. It’s easy to assume most private investors have their holdings in smaller properties, that is a foolish notation to have. Here is a breakdown of how much private investors dominate the market:

  • As of 2021, 61% of all capital invested in properties valued between $15M to $50M came from private investors.

  • 91% of apartments valued under $15M are controlled by private investors.

  • 75% of apartments valued between $15M to $50M are controlled by private investors.

  • 82% of retail valued under $15M are controlled by private investors.

  • 60% of retail valued between $15M to $50M are controlled by private investors.

  • 75% of office space valued under $15M are controlled by private investors.

  • 64% of industrial property valued under $15M are controlled by private investors.

Screenshot 2021-05-03 10.04.29.png

Private investors are a major force in every investment under $15 million and most high valued investments, but institutions still have a major control in some investments. Investment firms and REITA’s are still the largest investors in office spaces and industrial properties valued between $15 million to $50 million.

So what does this mean? It first showcases that you as a private investor are a much greater force with better access to capital and tools. It also means there are still opportunities for you to grow your portfolio as you are most likely going to be working alongside someone of your equal.

Carlos Azucena