Still, “there are many in the market who would question whether real estate is now starting to head toward its eight-year nemesis known as the real estate cycle,” says Grinis. And with so much capital looking for deals, investors face stiff competition. “Investors also reacted to these concerns as 2016 fundraising dipped 15% from 2015 levels to $104 billion.”

And it is still unknown how the policies of the Trump administration, Brexit and Abenomics will impact the world economy. “So, while there is much to suggest the real estate fund market is on solid footings, we are expecting some fault lines to show as 2017 progresses,” says Grinis.

CHICAGO—Even though the commercial real estate industry faces some uncertainty in 2017, there is a tremendous appetite for real estate among investors. In fact, according to a new report just put out by Mark Grinis and Steve Teubner, partners at Chicago-based Ernst & Young, real estate funds have experienced “something of a golden age over the last few years.” At the end of last year, the managers of closed-ended funds had $239 billion ready to deploy, up from $210 billion in 2015 and significantly higher than a decade ago, when they had just $132 billion, according to Preqin figures cited in the Ernst & Young report.

With those numbers, it's no surprise that all types of investors, from pension funds and insurance companies through to sovereign wealth funds and family offices, have increased their allocations to real estate.

“Many now allocate between 8% and 10% to the asset class, and their quest for yield in a persistently low-interest-rate environment, and an era of loose monetary policy, is leading to real estate investing representing around 10% of the economy in many markets,” says Grinis, the global real estate fund services leader for E & Y. “They are attracted by returns that offer a better reward than the negative yields now seen in many fixed-income investments.”

Distributions from funds have reached record levels over the last three years, he adds. According to a Preqin survey, 90% of LPs said real estate private equity funds had exceeded their expectations over the last year.

Still, “there are many in the market who would question whether real estate is now starting to head toward its eight-year nemesis known as the real estate cycle,” says Grinis. And with so much capital looking for deals, investors face stiff competition. “Investors also reacted to these concerns as 2016 fundraising dipped 15% from 2015 levels to $104 billion.”

And it is still unknown how the policies of the Trump administration, Brexit and Abenomics will impact the world economy. “So, while there is much to suggest the real estate fund market is on solid footings, we are expecting some fault lines to show as 2017 progresses,” says Grinis.