On paper, this would seem to be the perfect time to be an emerging real estate investment manager. Historical levels of capital are flowing into real estate, meaning there should be enough for everyone. Investors are looking for value-added and niche investments to boost returns, which are the types of strategies emerging managers thrive on. In reality, however, institutions are scaling back their commitments to new relationships. In 2006, tax-exempt investors expected to commit 50.1 percent of their capital to new managers; in 2007 that percentage fell to 27.8 percent. And in 2008, only 22.3 percent of capital is expected to go to new managers, according to Tax-Exempt Real Estate Investment Survey 2008 published by Institutional Real Estate, Inc. in conjunction with Kingsley Associates. This scaling back of additional manager relationships effectively leaves emerging managers out in the cold because, by definition, they have not had previous institutional experience.

It is going to take a little bit of luck and some very adroit broken-field running from policy makers in the central banks of the United States and European money centers to keep the current economic contraction from dropping into a deep and relatively long recession. But given this knowledge, I believe the odds are with the runners.

Everyone is familiar with the sayings “There’s no such thing as a free lunch” and “If it looks too good to be true, it probably is.” But when institutional investors come across a seemingly good real estate opportunity, they will need more than proverbs to distinguish the lucrative deals from the costly ones.