Real Estate Secondaries Are Becoming the Market’s Safety Valve

• Second coming: Brookfield’s latest exits highlight the now booming real estate secondaries market.

• Affordably profitable: Institutional investors are pouring more money into affordable real estate funds.

• Mallmentum: Simon Property Group beat earnings expectations, riding the resilience of high-quality retail real estate.

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Editor’s Pick

Real Estate Secondaries Are Becoming the Market’s Safety Valve

The once-niche world of real estate secondaries is stepping into the spotlight. Secondary transactions, where investors buy and sell stakes in existing private real estate funds rather than investing in new ones, are booming as limited partners look for liquidity and fund managers seek creative ways to recycle capital. Brookfield’s recent announcement that it completed its first major real estate secondaries exits marks a turning point for an industry that has quietly evolved into a key part of the investment landscape. With direct real estate transactions still lagging due to stubbornly high interest rates, secondaries are offering investors something rare in today’s market: movement.

The appeal is clear. Secondary deals allow investors to buy into seasoned portfolios at discounts while giving sellers a way to rebalance or exit long-term holdings without waiting for traditional sales. According to Ares Management, which has also expanded its activity in this space, transaction volumes jumped nearly 50 percent in 2024, reaching about $14.6 billion in net asset value. That surge is being driven by aging closed-end real estate funds that are well past their original timelines and by investors who are more comfortable trading partial ownership in private funds now that valuations have started to stabilize. Brookfield’s decision to sell industrial and student housing portfolios ahead of schedule shows that even large managers see secondaries as a viable liquidity strategy, not just a back-office function.

Beyond the need for liquidity, secondaries are benefiting from a deeper cultural shift in private real estate. The long-term hold model—where capital is locked up for years—doesn’t fit the modern appetite for flexibility. Pension funds and sovereign wealth investors want to rebalance allocations more frequently, and GPs are responding with continuation vehicles and partial exits. These deals often come with cleaner data, clearer cash flows, and less uncertainty than ground-up development or new acquisitions. As Ares noted in its recent secondary market outlook, investors are treating these trades as “core plus” exposure with a shorter duration and more transparent risk.

But while the market is heating up, it’s not without its challenges. Discounts to net asset value can be steep, sometimes 20 to 50 percent, especially for funds with older or harder-to-value assets. That makes price discovery tricky and slows down deal flow. There’s also the question of sustainability. If interest rates start to fall and direct real estate sales pick up again, the urgency for secondary trades could fade. For now, however, the combination of stuck capital, maturing funds, and sophisticated buyers is creating an ideal environment for secondaries to thrive.

As the secondary market grows, it’s also changing the relationship between managers and investors. LPs are demanding more transparency on valuations and liquidity options, effectively turning fund managers into ongoing capital partners rather than static stewards of assets. Landlords and operators may eventually feel the ripple effects, too, as funds with more fluid ownership structures require faster reporting and more responsive management. The rise of real estate secondaries could make the private real estate world not just more liquid, but more accountable.

Overheard

Big Capital Moves Into Affordable Housing

Institutional investors are getting serious about affordable housing. CIM Group and Bryant Group Ventures just launched a $1 billion Affordable Housing Impact Fund to invest in multifamily projects across major U.S. cities. The move comes as the housing shortage has become too big to ignore. Freddie Mac estimates the country is short nearly 3.8 million homes, and more than half of renters are considered cost-burdened. That kind of demand is hard for investors to overlook, especially as other real estate sectors struggle with high vacancies and rising financing costs.

The new fund will put money into both debt and equity, helping to build and preserve units that serve lower-income renters. It joins a growing wave of institutional capital moving into affordability, following firms like Goldman Sachs and Nuveen. For investors, the appeal is clear—affordable housing occupancy rates stay above 95 percent even in downturns, offering stability in a volatile market. But building affordable housing isn’t as easy as buying stabilized apartments. Layers of local regulation and complex tax incentives can slow down projects and squeeze returns, which means success will rely as much on expertise as on capital.

This shift could change the landlord-tenant dynamic in this space. As institutional owners enter, tenants and regulators will expect more data, transparency, and partnership. In order to avoid bad optics, corporate landlords will need to act less like rent collectors and more like community stewards. If the big money coming into affordable housing can navigate that balance, it could mark a turning point for one of the most persistent challenges in real estate.

Simon Property Group’s Results Challenge the Retail Real Estate Recession Story

Simon Property Group surprised the market by raising its full-year 2025 revenue and profit outlook after a stronger-than-expected third quarter. The company reported revenue of $1.45 billion, up from $1.34 billion a year earlier, and net income rose to $607 million from $582 million. Occupancy across its U.S. malls and outlets held steady at 96.4 percent, showing that well-located retail properties continue to perform even in a cautious consumer climate.

For the retail real-estate sector this is significant. Many had assumed that malls and outlet centres were permanently impaired by e-commerce and hybrid-shopping habits—but Simon’s results suggest that well-positioned retail real-estate is showing resilience. The uptick in base minimum rent per square foot reflects stronger-than-expected pricing power. In an environment of elevated interest rates and soft property sales, having a stable occupancy rate near 96% gives a major retail REIT the confidence to raise its guidance. If Simon’s performance is any guide, other retail centres may also be moving from survival mode to selective growth mode.

That said, the good news comes with caveats. The strong leasing and occupancy are concentrated in an upper-tier subset of retail like luxury, outlets, “experiential” malls, so the broader sector may not uniformly benefit. Rising costs, supply-chain uncertainty for tenants, and shifting consumer behaviour (especially among younger shoppers) still loom. For other landlords, matching Simon’s results may be difficult if they have less desirable locations or tenant mixes. And while FFO is up, valuations and cap rates remain under pressure in the broader CRE market, which means any upside may be muted. Retail real estate has been incredibly resilient but the winners likely will be the best assets in the best locations and leases to operators who are able to adapt to the quickly changing retail trends.

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Propmodo Daily is written and edited by Franco Faraudo with contributions from readers like you and the Propmodo team.

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