- Nontraded REITs have fulfilled around $56B in redemption requests, reducing the backlog to less than $1B, or under 2% of total requests, according to Robert A. Stanger & Co.
- Starwood Real Estate Income Trust (SREIT) remains the lone fund with significant outstanding redemptions, representing nearly all remaining sector withdrawals.
- Fundraising in the nontraded REIT space has slowed, with $7.5B raised over the past 12 months amid shifting investor preferences and regulatory changes.
The Big Picture
Investor redemption queues that once overwhelmed nontraded real estate investment trusts (REITs) have mostly cleared. Only one fund — Starwood’s — continues to struggle with withdrawal volume, reports BIsnow. Other funds, such as Blackstone’s BREIT, have fully normalized operations.
One Fund Left Behind
While most major nontraded REITs have stabilized, Starwood Real Estate Income Trust (SREIT) is still facing elevated investor withdrawal requests. At the end of August, SREIT had $999M in pending redemptions, accounting for 11.6% of the fund’s net asset value. That represents nearly all outstanding redemption requests across the nontraded REIT sector.
Though Starwood loosened its withdrawal cap earlier this year — increasing the monthly redemption limit from 1% to 1.5% of NAV — the backlog persists.
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How We Got Here
The redemption surge began in late 2022 and intensified into 2023, prompting both Blackstone (BREIT) and Starwood (SREIT) to limit investor withdrawals. BREIT began fulfilling all requests by March 2024 and fully lifted its withdrawal cap, with net redemptions declining 97% year-over-year by January 2025.
Across the sector, nontraded REITs have now processed $56B in redemptions. The outstanding backlog has dropped to about $1B, or less than 2% of total requests.
Fundraising Slows, But Capital Still Flows
Despite improved liquidity, redemptions still outpace new fundraising. Nontraded REITs brought in $7.5B over the past 12 months. Overall fundraising in alternatives reached $130B through August 2025, with just 13% targeting real estate.
Private equity and credit strategies continue to attract the bulk of investor interest. More than half of the capital raised went to credit funds, maintaining a trend seen over the past five years.
Top alternative managers, including KKR ($22.8B) and Blackstone ($15B), have collectively raised $540B since 2020, with $187B aimed at real estate.
Why It Matters
The shakeout in nontraded REITs has forced a realignment in capital flows and investor sentiment. The worst appears to be over. However, ongoing challenges in fundraising and asset disposition — especially for legacy portfolios — suggest continued volatility.
For managers, however, the changing regulatory landscape could open up new opportunities to restructure and reengage investors in the coming year.
What’s Next
While redemption pressures have eased across most nontraded REITs, SREIT remains one to watch. If it fails to reduce its backlog further, it may face increased scrutiny or pressure to further adjust liquidity terms.
As the broader market shifts toward credit and infrastructure, real estate sponsors may need to adapt their strategies. Attracting fresh capital is becoming more challenging in a cooling environment for property-focused funds.
