Private equity and venture capital investment in the commercial real estate industry saw a 60% decline worldwide in 2022, according to S&P Global Market Intelligence data.

In total, private equity and venture capital firms invested $20.73 billion in the sector in 2022, compared to $52.08 billion of investments in 2021.

2022 witnessed a total of 251 private equity-backed transactions, a drop from the 365 deals recorded in the whole of 2021, representing a 31% decline of the full-year total.

Investors were keen to take part in the post-pandemic revival of the real estate sector at the end of 2021, but in 2022 the inflationary pressure was intensified by factors such as Russia's invasion of Ukraine, according to the Preqin Global Report 2023: Real Estate.

There have only been 39 announced or completed deals so far in 2023. Year-to-date through May 22, a total of $3.51 billion investments were carried out, which is below the $6.30 billion that private equity firms invested into the sector in the first quarter of 2022.

These numbers suggest that 2023 will be another challenging year for the commercial real estate market. Deal activity and fundraising in the sector are being impacted by rising rates and the gaps between buyer and seller pricing expectations are expanding, the report noted.

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Deal activity in the global real estate industry peaked in 2021. Notable transactions included private equity giant KKR & Co. Inc. and Global Infrastructure Partners' acquistion of data center operator CyrusOne Inc. in an all-cash transaction valued at roughly $15.16 billion. Also during that year, a group of investors led by Canderel Real Estate Property acquired Canada's Cominar Real Estate Investment Trust for $4.56 billion. The acquiring group also included partnerships managed by Sandpiper Group Holdings Inc., FrontFour Capital Group LLC, and Artis REIT.

The second largest deal in the span of three years was in 2022, when private equity giant Blackstone Inc. purchased PS Business Parks Inc. for nearly $7.53 billion.

US and Canada region dominates

Real estate companies based in US and Canada received the largest portion of private equity and venture capital investments in the last three years. The region accounted for $55.22 billion of the $76.32 billion of investments in the sector globally since 2021.