To better understand how real estate investment managers are planning for the year ahead, Juniper Square conducted a survey between September 24 and October 2, 2020 of 45 Principals, CEOs, CFOs and COOs representing a mix of regional and nationwide sponsors of varying sizes.
Respondents reported they expect growth ahead, and are relying on trusted third parties and technology to scale in a lean and agile way.
Mixed results this year, but growth expected ahead
A slight majority of the respondents (55%) shared they are on track to raise the same or more this year versus last year. 43% have acquired the same or more (in dollar value) this year versus last.
The top priority for this group next year is scaling their business and growing assets under management. 87% expect to raise more capital next year as compared to this year, and 89% expect more acquisitions.
Outsourcing brings agility and enables scale
Roughly half of sponsors who anticipate raising more capital and acquiring more properties next year do not plan to increase their headcount. At the same time, 45% of all respondents outsource accounting or fund administration today, and another 14% plan to do so soon. (For firms that make no more than one-quarter of their revenue from management fees, that number was even higher: 67% are outsourcing versus 27% of firms that make more money from fees.)
Why outsource? More than just cost savings, respondents indicated the top benefits for them were an ability to run a lean operation and scale quickly with agility in this quickly changing market. For most of those who outsource, time is no longer a primary obstacle to achieving growth goals – which is still the case for firms who have kept these functions in-house.
It seems to be working: most of those that are outsourcing accounting and fund administration plan to increase their investment in this area next year.
Technology adopters outperform
One-third of respondents are on track to spend more on software this year than last. These technology adopters are outperforming those who are spending the same or less on software this year.
- Sponsors who report increasing their investments in technology are more than twice as likely to be on track to raise more capital this year versus last (67% vs 31%)
- Sponsors who report increasing their investments in technology are more likely to be on track to do more acquisitions this year (as measured in dollars) versus last (53% vs 31%) – something many investment managers are struggling with
Most of this group plan to accelerate their tech adoption moving forward. 73% say they will invest even more in software next year than this year, as compared to 27% who say the same of those who are spending the same (or less) this year on software.