Future of REPE

Not really going to comment on the value of office part of the question beyond noting that the "smart" money is betting on the sustained value of the asset class (I am not about to bet against). I mean, do you really want to be the dude sitting in your living room/basement on zoom when most of team is in the conference room?? As soon as FOMO kicks in, I think this debate will end, especially when the gunners get back to doing what they must for promotion in all the white collar industries that rent office space.

To the question of "future lucrativeness" of the private real estate business, I think the big question has little to do with COVID, but all do with the maturation of the industry. I mean first things first, most institutional investors have increased and/or recommitted to real estate allocations in 2020, so availability of capital not likely to be the issue. The issue, if there is one, is fee compression and competition. As the big LPs demand lower and lower fees, the smaller one's will want the same deals and are going to continue to band together to make it happen. Plus, expect more and more LPs to open up direct platforms and thus negate the need for fund managers (CalPERS is a good example), or they will just use the PE shop has a "front" for small fee (this is basically what SMAs are/have become). This will reduce the profitability of the fund managers, and thus the big bonuses they have been able to pay this last decade. 

This shouldn't be a surprise, the area of mainline financial management (i.e. stocks and bonds) has been dealing with this for decades. Wall street firms do not have the same advantages when anyone can and does get a Bloomberg terminal these days. Luckily real estate still has the advantage of being far more complex and nearly impossible to commoditize to the point it can be keyed into a Bloomberg for easy trading. So, real estate operators and investment managers will still have a place, but being simple "middlemen" and "fund aggregators" is going to get more and more commoditized. 

Thus, expect more "private equity" type ventures (not just RE, but PE/HF types also) to look for more "public money". That's the next frontier, getting vehicles approved and fitted for 401k/403b/IRA style accounts that give access to the asset class but have the liquidity/framework for small investors (non-trade REITs/BDCs and Interval Mutual Funds are doing this already). The crowdfunding space will continue to get explored by big institutions, but that world has still be set for accredited investors. 

Should note, all this activity should be good for creating more and more jobs at various places (like on direct real estate platforms at institutional investors).