The two biggest private real estate deal announcements this week had two common threads. First, both transactions involved major institutions making cross-border forays via the acquisition of an overseas manager. Second, in both cases, the manager acquired is best known for its logistics expertise.

The transactions in question are Toronto-based Oxford Properties Group’s acquisition of London-based real estate firm M7 Real Estate and Swedish private equity firm EQT’s purchase of Pennsylvania-based real estate investment manager Exeter Property Group.

Achieving scale quickly was a key objective with both deals, with Oxford gaining €4 billion of real estate assets under management in Europe through M7 and EQT adding an approximately $10 billion global property portfolio with Exeter. Oxford told PERE it intends to more than double M7’s AUM to €10 billion over the next five years as it strives to increase the logistics allocation within its European portfolio from 5 percent to its targeted 20 percent. Meanwhile, EQT said in its deal announcement it intends to further expand Exeter’s logistics business globally and scale the firm’s US life science/office and residential platforms.

Scale is important in any property sector, but none more so than in industrial right now. The sector remains one of the most favored strategies in private real estate, accounting for 48 percent of the $18.9 billion of sector-specific fundraising in 2020, according to PERE’s full-year 2020 fundraising report.

And as David Seymour and Will Bryant of law firm Ropes & Gray noted in a thought piece this week, in taking these types of operating partner or manager positions, investors are clearly looking to maximize their access to opportunities in the most competitive markets. These days, logistics is about as congested a sector as there is, and that is showing no signs of changing anytime soon.

Getting to scale in a strategy either involves building a team internally, which costs time and money, or acquiring that scale externally through platforms or partnerships. At one time, a firm could have built its own platform in-house and caught up relatively quickly to its competitors. But as the private real estate industry has matured, so have managers, which have grown far larger and developed significantly more capital relationships than firms of a decade ago. A case in point is the minimum five-year fundraising amount to crack PERE’s top 50 largest private real estate managers. In 2013, the amount was $1.37 billion. Just seven years later, the number had risen to $3.12 billion.

As Roger Singer, head of real estate at another law firm, Gibson Dunn, told PERE this week, that game of catch-up has become more and more difficult. He said: “Let’s say it takes a large manager entering the industrial space 10 years to get to where Exeter is today. Where is Exeter going to be in 10 years? You’re chasing someone who is way ahead of you. If you start from scratch, it’s a very long climb.”

Given such factors, manager acquisitions will be increasingly the route that large institutions take to achieve their desired exposure to real estate, whether that be a particular market, sector or the asset class overall. Fewer and fewer will find it worthwhile to play the organic, or waiting, game.

Don’t miss PERE’s debut Investor Report, which reveals 2020’s biggest real estate fund commitments, the most active fund investors in the asset class and more. Download it here.