It’s 2025 now, and many funds can’t wait much longer to put that capital to work. The investment window for capital raised in 2020 and 2021 is closing, and with an improved rate environment and generally more attractively priced assets hitting the market, signs point to this maybe being the year that money finally moves.
For commercial real estate, the impact could be significant. Many investors have also had their invested capital locked up for years as sponsors struggled to exit in a market without many buyers or viable refinancing sources. Others have been waiting for new opportunities at the right price.
Here’s why private equity may finally deploy its cash in 2025—and what that could mean for CRE investors.
When private equity funds raise money, they usually commit to a fixed investment period—typically four to six years—during which they must invest that capital. This can help enable more patient and disciplined investment decisions and diversification over time.
Funds can typically ask for more time to deploy capital, but these extensions usually require majority investor approval. Even when granted, they can frustrate investors.
Private equity funds typically run on a ten- to twelve-year cycle, from investment to exit. Drag out the investment phase beyond five years, and hitting those deadlines may get harder. This can keep investors’ money locked up longer than they planned.
Of PE’s record $2.62 trillion in dry powder, more than $500 billion comes from funds raised in 2020 and 2021. Much of that capital may be nearing the end of its investment window. This year, many fund managers have two choices: deploy the money or make the tough ask for an extension.
Last year, some of the world’s largest private equity funds signaled that a big slice of their dry powder was headed for commercial real estate.
Specifically, they’re eyeing what they see as steep bargains in the sector. As some owners are forced to cut their losses and unload properties, some funds are scooping up distressed assets at discounted prices. It’s a sharp turn from recent years, when many investors clung to commercial properties bought or developed before their cheap debt matured, hoping to avoid selling at a loss.
“We could be on the precipice of one of the most significant real estate distressed investment cycles of the last 40 years,” said John Brady, head of real estate investment at Oaktree, one of the world’s largest alternative investment firms.
Blackstone’s global co-head of real estate, Nadeem Meghi, shared a similar view: “What we see ahead is an unparalleled opportunity to deploy more than $65 billion of dry powder into a dislocated environment.”
Rising CRE transaction volumes are evidence of this trend. In 2023, commercial property acquisitions dropped 50% as many sellers stayed on the sidelines or held out for valuations buyers wouldn’t accept. As interest rates eased and the bid-ask gap narrowed, deal flow stabilized in early 2024. By the third quarter, transactions were climbing again for the first time in years.
So, private equity has a lot of capital it needs to deploy, and it’s eyeing opportunities in private real estate. Why might this matter to the average CRE investor?
Three key reasons:
As capital potentially flows back into the market, deal activity is likely to pick up—but not every opportunity will be a good one. At the start of a cycle, we believe careful selection and solid information are key to making smart investments.
CrowdStreet connects investors with opportunities in commercial real estate. For more on the market and insights on our deals and process, check out CrowdStreet's U.S. Commercial Real Estate Investing Outlook for 2025.