Middle Market Real Estate: An Inefficient Market Prime For High Yields

Better pricing and better structure in the middle market

Middle Market Real Estate is an inefficient market with mispriced assets and less risk that results in a fertile opportunity set for investors who are looking for investments with above-average yields and low risk. The average transaction size of this market segment relative to the amount of capital seeking to be deployed, together with timing pressure and structural constraints, make it impractical for large institutions to execute middle market strategies. By targeting only small to mid-size equity investments, there are opportunities to capitalize on these inefficiencies and identify mispriced assets with significant growth potential.

WHAT IS MIDDLE MARKET REAL ESTATE?

The differences between institutional and middle market commercial real estate is the market value. A middle market real estate property has a market value below $50 million dollars and usually includes office, retail, industrial and multi-family properties. Properties with a market value over $50 million are classified as institutional.

SIZE OF THE MIDDLE MARKET REAL ESTATE

Transaction volume in the middle market far exceeds that of the institutional market. This is where middle market commercial investors obtain returns. Surprisingly, mega players such as Carlyle, KKR, Colony, and Apollo represent only 5.2% of the commercial real estate market volume, creating a highly competitive environment for these assets.