Real estate deals insights: Q3 2018

Executive summary

As we finalized this quarter’s publication, the US was named the most competitive economy in the world, corporate earnings by Wall Street firms substantively surpassed expectations, US job openings topped seven million for the first time, and manufacturers increased their capacity for the 16th straight month. All of these factors, we believe, provide continued support for our view of an elongated real estate cycle and incremental deal activity.

And, in addition to this positive backdrop, we continue to see catalysts in the market that if unabated will provide tailwinds to sector deal activity for some time to come. These include the tax and social benefits provided through opportunity zones, the acceleration of capital activity being allocated to the intersection of technology and real estate, the quantum and availability of private equity capital, and the continued penetration of nontraditional debt capital sources. As a result, absent a market shock arising from geopolitical factors or monetary policy, our outlook remains positive.

Key trends and highlights

• Year-to-date transaction activity (through August) increased both in terms of deal value and deal volume, reversing a trend of year-on-year declines observed in 2016 and 2017. Portfolio and entity-level transactions drove the increase.
• Global closed-end private real estate fundraising volume exceeded prior-year levels, while dry powder reached a record $294 billion at the end of September 2018.
• Real estate technology (or PropTech) has seen an increase in funding from venture capital firms and other investors, with Q3 2018 experiencing historic investment levels totaling $1.0 billion.