Global real estate capital raising activity slips

Global capital raising activity in non-listed real estate fell by 3.1% year-on-year to €246bn (£217bn) in 2022, according to new research. The report, compiled by ANREV, INREV and NCREIF, said that capital raising activity remained strong despite uncertain market conditions. Capital raised in 2022 fell across the Europe, Asia Pacific and US markets. Vehicles with global strategies were the only category to see a rise in capital raised, increasing by €8bn to €64bn last year. The researchers said the amount was almost on a par with the €65bn amount raised for European strategies but was still some way behind the €85bn raised to target the US. However, the report’s authors noted that weak levels posted in H2 2022 are “starting to negatively feed into the near-term capital raising outlook”. Over the next two years, 62% of investors are expecting to maintain or increase capital raising activity, compared with 75% in 2021. The number of industry figures expecting to reduce their capital raising activity in the next two years stands at 8% – its highest level since 2018. For the first time, Asia Pacific investors became the primary source of capital for real estate globally, contributing 35% of total capital raised. European investors accounted for 30%, while North American investors contributed 34%. Sovereign wealth funds and government institutions – the two investor types that dominate the Asia Pacific market – have grown to a combined share of more than 15% of the total capital raised globally in 2022. That was the highest share recorded since the records began. Pension funds and insurance companies continued to decline in importance as a source of capital, with the combined contribution of both groups falling to 49% of the total. The report also noted that for the first time the combination of pension funds and insurance companies contributed less than half of the total capital raised. Non-listed real estate funds remained the most popular route to invest into real estate globally, raising 56% of equity in 2022. The report’s authors said it was the highest level seen since 2015. INREV director of research and market information Iryna Pylypchuk said: “Sharp market deterioration and the contrast in global real estate performance highlights 2022 as a year of two halves, with the sentiment deteriorating as we moved into 2023. “While the asset class has a long-term investment horizon, it’s clear that ongoing market uncertainty is now negatively impacting the near-term capital raising outlook. “This survey reveals the rapid shifts in preferences as markets undergo fresh shocks and uncertainty persists. The rise of Asian Pacific capital on the global playfield stands out.” Pylypchuk added that there had also been anomalies, including disparity between investor interest in and capital raised for private real estate debt. She said: “There are a lot of nuances around equity strategies too, how investors prefer to access different markets and strategies, depending on the maturity of segment, sector, and investor domicile. “What is a temporary blip and what is a major shift is difficult to disentangle at this point in time.” To send feedback, e-mail pui-guan.man@eg.co.uk or tweet @PuiGuanM or @EGPropertyNews Image © Source/REX/Shutterstock