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undraising for private real estate funds has been sluggish, but that shouldn't deter prospective managers from entering the market. Despite commercial real estate's biggest players experiencing an 11-year fundraising low in 2023, according to Private Equity Real Estate data, and a year-over-year dip in dry powder globally since the Global Financial Crisis, as reported by Pitchbook, opportunities still exist.

    The current landscape presents unique possibilities for smaller fund managers or new entrants. With investors flocking to large vehicles targeting high-profile assets, there's room for smaller players with focused strategies to shine. The end of the elevated interest rate cycle and the Federal Reserve's easing policy have improved the debt space, making it more attractive.

    A fund structure can be beneficial for smaller or newer managers, providing access to capital for nimble investment strategies, better debt terms, and potential cost-effective fund-level financing. It also enables sponsors to pursue complex investments, diversify their portfolios, and establish a track record without being tied to the large, commingled model.

    To succeed, managers must set realistic benchmarks, prepare for fees and costs associated with building out the fund, and align the fund size with anticipated deal flow. The sponsor's investment strategy is crucial, particularly for smaller or newer sponsors who should focus on leveraging their expertise in a specific asset class, niche, or geographical region.

    The private real estate fund formation landscape has shifted as investors seek quality entry points, certainty, and transparency from sponsors. With growth in secondary markets and prices stabilizing in some CRE subsectors, emerging fund managers with established track records and focused strategies may find opportunities in the current market.