EisnerAmper and Preqin Offer Series Examining Impact of COVID-19 on Private Equity Real Estate
June 23, 2020
By Kristen Lewis
For the second year in a row, EisnerAmper is working with Preqin to provide market intelligence on the real estate private equity sector. Given the shifting nature of this landscape, the series will analyze the impact of COVID-19 on the private real estate markets. The series incorporates timely data analysis to explore deals, fundraising, and other key trends in the industry.
With the markets in disarray and the pandemic impacting sector dynamics, private equity real estate (“PERE”) activity has slowed thus far in 2020. Lisa Knee, National Leader of EisnerAmper’s Real Estate Private Equity practice, published the first article in the series on this topic, setting the stage for further updates.
Restrictions to travel and daily life activities are altering PERE markets globally, with necessary modifications to behavior and business operations putting certain sectors under strain. As demand for traditional retail, hospitality property and hotels falls, the risk of poor financial performance rises exponentially. Deal flow has slowed worldwide and, compared to Q4 2019, the number of deals completed in Q1 2020 decreased 50% in Asia and declined by about 20% in North America and Europe.
Demand for multi-family assets has been stable as investors target cyclically resilient assets to protect capital in uncertain times. According to Preqin, the complete residential sector “witnessed a comparatively low decline in deal volume, dipping only 14% from Q4 2019 totals to $37 billion in PERE deals completed in Q1 2020.”
Fund managers are generally positive that because private real estate is a long-term investment, navigating short-term challenges is possible as the pandemic continues to impact the greater economy. It will be important to keep an eye on developing trends from changing behaviors in the wake of the pandemic. For example, with so many employees successfully working from home, there will be a major impact on the office sector regarding the amount of space needed and how that space is designed. On the other end of the spectrum, the logistics sector is poised for increased growth in the food industry, with online ordering picking up steam.
Click here to view the first article in the series: “How COVID-19 Is Changing Private Real Estate.”