A story in the press last week spelled out how the commercial property market is heading for a classic late cycle phenomenon – the arrival of the ‘vultures’.

The FT reported that private equity funds targeting distressed international real estate have already raised more money this year than the last two put together. So it appears we’re about to see the creation of a lot of vulture – or ‘opportunity’ if you’re squeamish – funds.

Quoting data provider, Preqin, the article reported that funds planning to invest in troubled property assets raised $8bn in the first quarter of 2019 alone whereas last year they only raised less than $1bn in the whole of last year.

So who might be queuing up to sell to these private equity vultures? Well, in the UK it will probably quite a few of other private equity investors who piled primarily into the retail property market a few years back. Their plans for successful exits from large shopping centres have unraveled quicker than you can say ‘CVA’.

As James Watson – Colliers International’s Head of Retail Capital Markets – observed at the launch of the firm’s Midsummer Retail Report recently: “There is a substantial and growing group of investors who are currently sitting quietly on the sidelines eyeing healthy assets that are starting to look cheap.

“The private equity buying spree that took place in the shopping centre market five years ago is rapidly unwinding and these assets are being dumped back into the market. This will create a short-term glut of product with a distorted pricing profile.”

Against this backdrop, the potential for an over-correction in pricing is very real. More robust assets with better potential will be marked down along with the lame ducks and, as such, may create even more ‘bargains’.

However, aside from the likely shedding of assets by the private equity houses there are still not a lot of forced sellers in the market. Some late cycle buyers are finding themselves in breach of loan covenants but we’re not yet seeing the bloodbath that took place in the wake of the financial crisis.

Certainly this new climate will put increasing pressure on the big UK REITS who hold substantial portfolios of retail assets and will see their NAV take a further hammering.