AEW Deploys $1.8B Fund Amid Market Shifts

AEW Capital Management has deployed about 55% of its $1.8 billion North American real estate fund, which closed in July 2025. According to Managing Director Tony Crooks, rising and volatile interest rates could pause transaction activity, while abundant debt is slowing the fund's deployment by allowing owners to refinance rather than sell.

Crooks described the current investment climate as requiring a "rifle shot" approach, contrasting it with the easier conditions of a few years ago. The fund, which was marketed for over two years and missed its original $2 billion target, is being deployed in a measured way. AEW anticipates returning to the market with a new fund in about a year.

Focus on Senior Housing and Multifamily

AEW entered the market highly focused on the distress and potential in senior housing. The firm has purchased 16 senior housing properties in 16 months. Crooks said those investments have performed well due to tightening market conditions, rising occupancy, and a complete halt in new supply. Capital is now flowing into the sector, increasing competition. AEW is also planning two senior housing developments, which Crooks said will be the first of the current cycle.

Conversely, the multifamily sector has seen copious new development. AEW expected to find significant distress after syndicators rushed into the sector in 2021 and 2022, with prices dropping 15% to 30% over the past five years. The firm thought it would be buying assets from lenders, but high liquidity and available debt have held up pricing. New deliveries continue to hinder rent growth, particularly in oversupplied markets like Austin. Crooks stated that the ability to earn outsized returns in multifamily this cycle is "very constrained."

Industrial and Retail Opportunities

AEW has found good opportunities in the industrial sector, including distressed plays from owners impacted by subdued tenant demand from 2023 to 2025. Crooks noted a substantial improvement in leasing and net absorption in 2026, which is now benefiting equity. Development is returning to industrial, and AEW plans to participate.

Given its value-add focus, AEW has deployed more capital than expected into retail, a sector Crooks called a "bear market" for a decade. The firm is particularly interested in grocery-anchored and lifestyle centers. Crooks said the firm is finally seeing actual rent growth from its retail investments, which provided the conviction to re-enter the space. The fund is also open to office buildings requiring only minor renovations but has not acquired any despite multiple bids.

Capital Markets Hurdle

From a capital markets perspective, a tremendous amount of debt liquidity is the primary factor slowing the fund's deployment. Crooks said any asset put out for refinancing receives multiple bids. Competition from credit markets is higher than JLL has ever recorded, according to its recent indexes.

This liquidity does not exist on the equity side. A KKR & Co. report indicates middle-market commercial real estate sponsors control $5.1 trillion of U.S. real estate but are underfunded for specialized capital needs. The result is that owners are refinancing, not selling. Crooks said this has held back the stress that funds like his would typically capitalize on in previous cycles, noting "the old rescue equity, today, is debt."

He said if debt were not as available, the fund would already be fully invested. Many loans making up the wall of maturities will need to be worked out in the next three years. Crooks advised watching debt capital flows closely, stating, "I believe that wherever that goes, that's where the market's headed."