Wondering why real estate feels stuck?
This frozen corner of the market could hold the answers:
Verus just released a sharp, timely update on a part of the market most people overlook: core real estate funds. They're still clogged, which is challenging but begins to answer questions plaguing real estate players.
1. Why hasn’t transaction volume rebounded?
Because the traditional core buyers, low-leverage, income-focused funds, are still on the sidelines. Selling to value-driven or opportunistic investors requires a price reset, and many owners aren’t ready to accept that. At least not yet.
2. Why are owners kicking the can?
Because they’re waiting for core capital to come back. Selling now means taking a loss. Waiting leaves the door open for a rebound. So you’re saying there’s a chance?
3. Where did the core buyers go?
They didn’t disappear; they got jammed up. Investors in open-end core funds tried to exit in 2022 and 2023 but couldn’t all get out. That created a massive redemption backlog, tying up capital and halting new investments.
4. What’s a redemption queue?
When investors ask to cash out at stale NAVs while actual values are falling, fund managers can’t meet those redemptions without hurting the remaining investors. So redemptions get delayed. Transactions slow, and the queue grows.
5. When will core capital come back?
Only when investors believe values have stopped falling. Recent NFI-ODCE returns have turned modestly positive, but with over $29 billion in redemptions still pending (about 16% of NAV) new inflows are still scarce.
6. Will this rebound look like the post-GFC cycle?
Probably not. After the financial crisis, many investors canceled redemptions once the outlook improved. Today, they have more choices, which means ODCE-style funds may not win them back as easily.
7. What makes this time different?
Debt is more attractive, and the fund landscape is more crowded. Many investors who are trying to step away from core funds may not return, especially if the funds still hold legacy office exposure or are stuck in redemption limbo.
Read the full report here.
PS -- real estate follows the capital markets. If you want to understand who the capital markets players are and what motivates them, DM us to explore joining our Fall FastTrack cohort.
COMMENTS