Open-End Real Estate Funds Turn to Secondary Sales as Redemption Pressure Mounts

September 18, 2026 - 01:58

Open-ended real estate funds are increasingly relying on secondary market sales to manage a wave of investor redemption requests, marking a shift in how these vehicles handle liquidity challenges.

Blackstone recently arranged secondary sales for investors in its BPP platform, a move that allows limited partners to exit positions when standard redemption channels are strained. The transaction highlights a broader trend across the sector, where funds that typically offer periodic liquidity are finding it harder to meet withdrawal demands without selling assets at unfavorable prices.

The pressure stems from a combination of higher interest rates, declining property valuations, and shifting investor sentiment toward real estate exposure. Many open-ended funds built their portfolios around core assets expected to hold value, but the rapid repricing of commercial property has left some facing a gap between what investors want to withdraw and what the funds can readily liquidate.

Secondary sales offer a middle path. Rather than forcing asset sales or suspending redemptions entirely, fund managers can transfer investor interests to buyers willing to accept a discount. This keeps the fund operating while giving exiting investors a clean break.

For now, the strategy appears to be gaining traction as a pressure valve. Whether it becomes a permanent fixture of the market depends on how quickly valuations stabilize and redemption queues shorten.