Real Estate Secondaries: The $20B Market LPs Are Using to Generate Liquidity Right Now

TL;DR: Real estate secondary transactions reached $20.3-25.1 billion in 2025 — up 25% per year since 2019 — and GP-led transactions now account for 72% of volume. Real estate LP positions are trading at 71% of NAV. Distributions from real estate funds hit a 10-year low (7% of NAV vs. 22% historical average). LPs need exits. Buyers are offering them at a price. Here is how the market works and where the opportunity sits.

According to Ares Management's 2026 secondary market analysis, real estate secondary transaction volume reached $20.3 billion in 2025. CBRE Investment Management's data puts the figure higher, at $25.1 billion, depending on which deal types are counted. Either way: real estate secondaries have grown at approximately 25% per year since 2019, and 2026 is tracking to exceed 2025's record.

The driver is simple. Real estate fund distributions have fallen to 7% of NAV on a rolling basis : a 10-year low. LPs committed capital expecting distributions to fund their own obligations. Those distributions have not arrived. The secondary market is the exit valve.

Why Real Estate Distributions Dried Up

Real estate fund distributions come from three sources: asset sales, refinancing proceeds, and operating cash flow. All three have been suppressed since 2022.

Asset sales: Rising interest rates in 2022-2024 compressed real estate valuations by 15-30% for most commercial property types. GPs who bought assets at peak 2019-2021 valuations cannot sell at a price that returns capital to LPs without admitting a mark-down. Many chose to extend fund lives rather than force exits at bad prices.

Refinancing: Properties that refinanced at 3% in 2020-2021 now face refinancing at 6-7%. Higher debt service costs eliminate distributable cash. Some properties cannot refinance at all because debt coverage ratios have deteriorated below lender requirements.

Operating cash flow: Office, retail, and certain hospitality assets experienced secular demand shifts from COVID and hybrid work that have not recovered. Even well-positioned assets in industrial and multifamily have seen rent growth moderate after the 2021-2022 spike.

The result: LPs are sitting in real estate funds with no near-term distribution visibility. The secondary market offers them a way out.

LP-Led vs. GP-Led Secondaries: How Each Works

Real estate secondary transactions take two forms:

LP-led secondaries: A limited partner sells their stake in an existing real estate fund at a negotiated price (typically a discount to NAV). The secondary buyer assumes the LP's remaining capital call obligations and future distribution rights. LP pricing in real estate secondaries averaged 71% of NAV in H1 2025, per Jefferies secondary market data : a 29% discount. Compare this to the broader PE secondary market, where pricing averaged 84% of NAV. Real estate discounts are wider because of greater uncertainty about valuations and exit timing.

GP-led secondaries: The fund manager creates a new vehicle (a "continuation fund") and moves one or more assets from the existing fund into the new structure. Existing LPs choose to cash out at a negotiated price or roll their investment into the continuation fund. GP-led transactions accounted for $14.5 billion : 72% : of total real estate secondary volume in 2025, per Ares data. They have grown 60% year-over-year. GPs use them to preserve ownership of their best assets rather than forcing exits at compressed valuations.

Where the Discounts Are Deepest

Not all real estate fund secondaries trade at the same discount. The asset type and market conditions drive pricing materially:

Asset Type	Estimated Secondary Discount to NAV	Driver
Office (suburban/CBD)	35-55% discount	Secular demand shift, high vacancy, refinancing stress
Retail (non-grocery)	30-50% discount	E-commerce structural headwinds, debt maturity stress
Hospitality (non-trophy)	20-35% discount	Variable demand, operational complexity
Multifamily	10-20% discount	Rent moderation, supply surge in Sun Belt markets
Industrial/Logistics	5-15% discount	Strong fundamentals, but some mark-to-market compression
Data Center / Digital	Near par or premium	Extreme demand, long-term leases with hyperscalers

Secondary buyers who specialize in real estate : Lexington Partners, Ares Real Estate, Goldman Sachs Vintage, PGIM Real Estate Finance, Landmark Partners (now Ares) : focus their underwriting on assets where the discount to NAV exceeds the expected remaining mark-down. If an office fund trades at 50% of 2022 NAV but the underlying buildings are genuinely worth 60-65% of 2022 NAV (after realistic mark-to-market), the buyer has a 10-15% margin of safety on a discounted entry.

The Dry Powder Supporting the Market

Why are secondary buyers still aggressive despite the uncertainty? Dry powder. The global alternative asset management industry has accumulated $215-302 billion in dedicated secondaries dry powder, per CBRE Investment Management's 2026 analysis. Capital is competing for good secondary transactions. The biggest risk for buyers in 2026 is not finding deals : it is overpaying for the wrong ones.

Adams Street Partners' $5 billion-plus secondaries program close (August 2026) is one data point in a broader fundraising cycle. Secondary capital continues to attract LP allocations because the math makes sense: buy at a discount, skip the J-curve, get diversified vintage exposure. In real estate secondaries specifically, the discount is wider than in private equity secondaries : offering more cushion for underwriting error.

Accessing Real Estate Secondaries as an Accredited Investor

The large real estate secondary specialists (Ares, Goldman Sachs Vintage, Landmark) manage institutional-only programs with minimums in the tens of millions. Accredited investors access the market through:

• Secondary-focused interval funds: Several interval fund managers have created vehicles with real estate secondary exposure at $25,000-$100,000 minimums and quarterly redemption windows
• Platform secondaries: Setter Capital, Palico, and similar platforms enable LP position sales at various minimums : you can sometimes purchase small pieces of large real estate fund stakes
• Non-traded real estate fund secondaries: Some broker-dealers enable secondary purchases of non-traded REIT and real estate fund positions on behalf of clients at minimal transaction sizes
• Mid-market real estate secondary GPs: Smaller secondary managers operating at $200-500M fund sizes often accept commitments from accredited investors at $250,000-$500,000 minimums through direct relationships or placement agents

The honest caveat: real estate secondary underwriting is complex. Buying at a discount to NAV only generates returns if your assessment of the underlying NAV is right. If the office portfolio you bought at 50% of stated NAV was actually worth 40% of stated NAV, you have lost money on entry. This market rewards deep asset-level underwriting and punishes passive discount-chasing.

Real Estate Secondary Market Data: The Numbers Behind the Trade

The real estate secondary market hit record volume in 2025. Per Ares Management's 2026 secondary market analysis, transaction volume reached $20.3 billion : approximately 25% compound annual growth since 2019. CBRE Investment Management's data puts the figure at $25.1 billion including additional deal types. GP-led transactions : where fund managers move assets into continuation vehicles : accounted for $14.5 billion (72% of total), up 60% year-over-year, per Ares. LP secondary pricing averaged 71% of NAV for real estate versus 84% for broader PE secondaries, per Jefferies secondary market data. Real estate fund distributions fell to 7% of NAV on a rolling basis (Q3 2025) : the lowest in a decade versus a 22% historical average, creating systemic LP liquidity demand. Dedicated real estate secondary dry powder stands at $215-302 billion globally per Adams Street Partners' market analysis, supporting continued buyer appetite even as deal volume records are broken annually.

Frequently Asked Questions

What is a real estate continuation fund?

A continuation fund (or GP-led secondary) is a new investment vehicle created by a real estate fund manager to hold one or more assets from an expiring fund. Existing LPs in the original fund choose whether to cash out at a negotiated price or roll their investment into the continuation fund. The GP is signaling they believe the assets have more value to create with additional time : continuation funds typically have 3-7 year lives. Secondary buyers provide the exit capital for LPs who choose to cash out.

Why is real estate secondary pricing (71% of NAV) lower than PE secondary pricing (84% of NAV)?

Real estate NAV marks are more uncertain than private equity NAV marks. Real estate valuations are appraiser-driven, using comparable sales transactions that may lag true market clearing prices by 6-18 months. In a falling market, real estate fund NAVs reflect yesterday's price, not today's. Secondary buyers apply a wider discount to compensate for: (1) the potential for further NAV write-downs, (2) less liquidity in real estate exit markets versus corporate M&A, (3) asset-specific risks (vacancy, debt maturity) that require specialized underwriting.

What is the typical return target for a real estate secondary fund?

Real estate secondary funds typically target net IRRs of 12-18% : higher than real estate primary fund targets (8-12% for value-add funds) because of the discount acquisition and J-curve elimination. The actual realized returns depend heavily on the entry discount, the asset quality, and the exit market conditions over the fund's life. Distressed real estate secondary acquisitions (deep discounts on stressed assets) can target 20%+ but carry commensurately more underwriting risk.

How long does it take to realize returns from a real estate secondary investment?

Because secondary buyers acquire mature fund positions rather than new investments, the J-curve is compressed. Initial distributions from asset income often begin within 12-18 months of investment. Full realization of returns depends on when the underlying properties are sold : typically 3-7 years after the secondary purchase. GP-led continuation funds often have more defined exit timelines (3-5 years) than LP-led secondary purchases of large commingled funds.

Author Disclosure: Jeff Barnes, MBA has no personal position in any company, fund, or platform named in this article. Angel Investors Network has no current commercial relationship with any party mentioned. AIN provides marketing and education services, not investment advice. Past performance does not guarantee future results. All investments involve risk, including loss of principal.