Real Estate's Next Chapter: Why Secondaries Matter

Private real estate appears to be entering a new phase of the market cycle. Following one of the sharpest valuation corrections in decades, asset values have largely reset, transaction activity is starting to recover and liquidity needs remain elevated across the market. Together, these dynamics are creating a market environment that looks materially different from one investors faced just a few years ago.   

A historic reset  

The sharp rise in global interest rates beginning in 2022 drove a broad repricing across private real estate. Higher borrowing costs, tighter lending conditions and reduced transaction activity pressured valuations across nearly every property type. 

Commercial real estate values declined by approximately 19% from their 2022 peak levels through year-end 2025, representing one of the most significant corrections since the Global Financial Crisis. More recently, however, signs of stabilization have begun to emerge. Average sector-level pricing increased by roughly 2% during 2025, marking the first broad-based improvement since the correction began. 

Sector-Level Indexes
Change in CPPI 

Source: Greenstreet as of 12/31/25

While the recovery is unlikely to be uniform across sectors and geographies, the reset in valuations has improved forward return expectations and created a more attractive backdrop for long-term investors. As history has demonstrated, periods of market dislocation often create opportunities for investors able to deploy capital selectively and with discipline.

ODCE Net Total Returns (1984-2025)

Capital constraints driving deal opportunities 

Global real estate fundraising has declined significantly from peak levels reached in 2021. At the same time, many asset owners continue to face refinancing needs, recapitalization requirements and broader liquidity demands.   

As fundraising has slowed, the gap between available capital and liquidity demand has widened. Owners continue to seek financing and capital solutions, while fewer market participants are positioned to provide them. This dynamic has expanded the opportunity set and shifted negotiating leverage toward investors with available capital.   

Hamilton Lane’s real estate deal flow in 2025 exceeded 2021 levels by more than 3x, illustrating the growing demand for capital solutions. This increased reliance on transaction-level capital has created a more LP-favorable environment, with investors benefiting from enhanced deal access, improved economics and stronger governance protections.

Global Fundraising by Volume ($bn)

HL RE Deal Flow ($bn)

Secondaries benefit from today’s liquidity dynamics  

Reduced fundraising, muted exit activity and ongoing liquidity needs have contributed to increased secondary transaction activity across the private markets. Within real estate, investors are increasingly able to acquire seasoned portfolios and high-quality assets at attractive discounts to underlying net asset value. 

Beyond attractive pricing, secondaries provide immediate exposure to stabilized, cash-flowing assets, reducing J-curve effects and accelerated return of capital. Secondary investors also benefit from enhanced transparency into underlying asset performance, portfolio composition and business plans, improving underwriting visibility and reducing blind-pool risk. 

Real estate secondary transactions continue to trade at a meaningful discount relative to broader private market secondary opportunities. This is primarily due to the real estate market remaining highly fragmented, with performance dispersion across sectors, geographies and individual assets as wide as it has been in years. In our view, this reinforces the importance of manager selection, asset-level underwriting and access to differentiated transactions.

Real Estate Secondary Market Size ($bn)

LP Portfolio Pricing (% of NAV)

Our view 

For long-term investors drawn to real estate, the opportunity today extends beyond lower asset prices. Rather, historic repricing, improving capital market conditions, limited new supply and persistent liquidity needs have combined to create a more favorable investment backdrop than investors have faced in recent years.  

That said, broader sector allocation alone is unlikely to drive outperformance. Performance dispersion remains elevated across sectors, geographies and individual assets, making manager selection, underwriting discipline and transaction sourcing increasingly important drivers of returns.   

In our view, real estate secondaries are particularly well positioned within today’s environment. The combination of attractive pricing, portfolio visibility, accelerated return of capital and ongoing liquidity demand creates a differentiated opportunity set for investors seeking exposure to private real estate.   

Looking ahead, we expect capital to continue gravitating toward assets capable of generating durable cash flows and stable income yields during periods of uncertainty. For investors able to navigate today’s fragmented landscape, real estate secondaries offer a compelling way to access these characteristics at a time when pricing, market fundamentals and transaction dynamics remain highly favorable.