The international real estate advisor has examined the volume of assets acquired by equity funds and investment managers in 2018 and 2019 and, assuming a typical five-year hold period, compared this to the volume of disposals over 2023 and 2024. As a result, it calculates that there is around US$500 billion of pent-up sales that funds have delayed over the last two years. Now that a recovery in liquidity and values is evident, Savills says that funds are increasingly likely to bring these assets to market (see graph below).

Many close-ended funds delayed asset sales given the challenging market conditions of 2023-24, for fear of selling at the bottom of the market and crystalising losses for their investors. But now that the market is in recovery, Savills expects to see an increase in asset disposals and fund exits, returning capital back to investors. Savills says that with institutional allocations holding largely stable, this will support the recycling of capital through the real estate market, supporting a recovery in fundraising and driving a significant uptick in transactional activity in 2025 and beyond.

Rasheed Hassan, Global Head of Cross-Border investment at Savills, comments: “The recycling of potentially US$500 billion of assets as a recovery takes hold will provide important impetus to market liquidity over the next few years. In a number of markets, volumes have remained subdued due to a dearth of available stock, opposed to a lack of active buyers. Once assets become available we are likely to see much more competitive bidding, given by Q4 2024 we were already seeing momentum gathering among buyers, with both cross border and domestic institutional investors increasing their real estate spending.”

Oliver Salmon, Director – Capital Markets, Savills World Research, adds: “In normal market conditions, real estate fundraising would be expected to lead deal activity. If this pattern would hold true, the outlook for dealmaking would be somewhat muted, as it remains a challenging environment to raise capital. But in this cycle, a recovery in transactional activity is not contingent on fundraising. Instead, the correlation will run the other way. First, there is plenty of dry powder to underwrite an increase in deal flow and we are beginning to see this come through already. Second, with institutional target allocations remaining broadly stable, it is the recycling of capital through the transactional market that will allow for new fundraising commitments.”

Read more in Savills annual Review of Global Capital Markets report.