Investors are increasingly turning to the real estate secondary market for its blend of flexibility, liquidity, and access to premium real estate assets.
Investors are increasingly turning to the real estate secondary market for its blend of flexibility, liquidity, and access to premium real estate assets.
Unlike primary real estate investments, which focus on newly issued properties and developments, the secondary market allows investors to buy and sell existing shares of real estate assets. This growing market is opening doors to a wider pool of investors and creating opportunities to diversify portfolios without the extended time horizons often associated with real estate investments.
In this article, we’ll explore what the real estate secondary market is, key trends driving its growth, and the benefits it offers to investors. From improved liquidity to strategic discounts, the secondary market offers unique advantages for those looking to capitalize on stabilized, income-generating properties.
What is a Secondary Market for Real Estate?
The real estate secondary market is focused on the trading of existing real estate investments, rather than the purchase of newly developed properties or fresh investment vehicles. Secondary market transactions enable investors to buy and sell positions in established assets, offering a unique route for accessing quality real estate investments without committing to the long-term development cycles typical of primary market investments.
Primary and Secondary Markets in Real Estate
The primary real estate market involves the direct sale of newly issued properties or shares in development projects. These primary transactions often require extended holding periods as assets are constructed, stabilized, and leased.
In contrast, the real estate secondary market emphasizes liquidity and offers shorter-term investment horizons, as investors are transacting on assets that are already established or income-generating. This makes secondary market investments appealing for investors seeking immediate cash flow, or those wanting to diversify their portfolios with more flexibility.
The Real Estate Secondary Market is Growing
According to CBRE, while many sources estimate transaction volumes in the global real estate secondary market are between $10-15 billion annually, they may actually be two-to-three times higher. Furthermore, CBRE predicts that real estate secondary transaction volume—which they estimate at 1%-2% of the market—could grow to 2%-3% of the $1,026 billion in unrealized value in private real estate funds and the more than $816 billion in non-fund structures.
Several key trends are contributing this growth, including:
- Institutional Interest and Private Equity Expansions - Institutional investors and private equity firms are increasingly active in the secondary market, driven by a need for greater flexibility and portfolio diversification. In addition to Goldman Sachs committing $3.4 billion to invest in stakes of private real estate funds, Ardian SAS—a major private equity firm—has recently expanded its footprint in Canada, opening a Montreal office and securing partnerships with Canadian pension funds. This move underscores the rising demand for secondary market opportunities, as large-scale investors seek access to liquidity and high-quality assets.
- Market Conditions and Strategic Rebalancing - Fluctuations in public market valuations have led investors to adjust their portfolios, often turning to the secondary market to manage their real estate allocations. Secondary transactions offer an attractive solution for those wanting to buy into or sell out of real estate investments based on changing market conditions.
- Recapitalizations and Retained Assets - General Partners (GPs) are increasingly using secondary deals to recapitalize assets, enabling them to retain control of high-quality properties without a full sale. This trend not only keeps valuable assets within a controlled structure but also opens up investment opportunities for new investors in an already stabilized and income-generating portfolio.
With the real estate secondary market maturing and transaction volumes steadily increasing, more investors are discovering the unique advantages it offers. From liquidity to the potential for diversification, investing in secondary real estate markets opens the door to a range of upsides that set it apart from traditional primary market opportunities.
Benefits of Investing in the Real Estate Secondary Market
Investing in the real estate secondary market presents unique advantages that appeal to a broad spectrum of investors. Secondary markets enable investors to acquire shares in established properties, bringing immediate benefits like liquidity, potential for discounted entry points, and reduced holding periods.
1. Liquidity
Traditionally, real estate is an illiquid asset. Primary market investments generally require a commitment to a holding period that can be lengthy, which locks up capital and can limit an investor’s flexibility.
One of the standout benefits of the real estate secondary market is the increased liquidity it offers. Secondary market transactions allow investors to enter or exit investments with more flexibility, as they can buy and sell stakes in the project or development more easily and free up capital without the long-term commitments that often come with primary market investments.
2. Access to Discounted Assets
Secondary markets often provide opportunities to purchase high-quality, stabilized assets at a discount. Since some secondary investments involve restructured deals or existing positions, investors may benefit from discounts that reflect current market conditions. This can lead to attractive entry points for investors looking to acquire assets below their primary market value.
3. Portfolio Diversification
Through secondary markets, investors can access a diverse range of asset classes and geographies. This level of diversification is valuable for mitigating risk, as investors can balance their portfolios with properties that are already income-generating or have been stabilized. Additionally, secondary markets make it easier to diversify across different property types, such as commercial, residential, or mixed-use properties.
4. Shorter Investment Horizons
Secondary market investments often have shorter holding periods compared to primary investments, which require extended timelines for development and leasing. By entering the market at a later stage, investors can capitalize on assets that are already generating income. This dynamic appeals to those who prefer not to wait through the lengthy development cycles of new properties.
5. Consistent Cash Flow and Returns
Since many secondary investments involve stabilized, income-generating properties, investors can benefit from immediate cash flow. For those focused on cash flow rather than long-term appreciation, the secondary market can be an efficient way to secure steady returns.
These benefits highlight how the real estate secondary market provides a flexible and accessible investment landscape, giving investors options that can align with a variety of financial goals and risk profiles.
Introducing the Parvis Secondary Market
The Parvis Secondary Market is designed to transform private real estate investing, addressing common challenges like liquidity, transparency, and portfolio diversification. With Parvis, investors can efficiently buy and sell tokenized real estate assets through secure, seamless transactions powered by blockchain and smart contract technology.
Our secondary market allows approved investors on Parvis to trade private real estate shares during quarterly secondary market events. These events are structured for ease: sellers list assets at their chosen price, and buyers have the flexibility to review, negotiate, and finalize transactions with full transparency.
By participating in the Parvis Secondary Market, investors gain a flexible and accessible way to adjust their real estate portfolios on their own terms. The Parvis Secondary Market is now available to approved investors on the Parvis platform. To learn more about how it works or to start investing, visit here.
