GLOBAL - Investors are less likely to commit to private real estate funds than they were at any point in the last two years, according to a report by Preqin.
The report also predicted that the fundraising environment was "unlikely" to improve over the next 12 months, with only 36% of investors saying they were likely to commit to new funds this year - 11 percentage points down from 2010.
Sarah Unsworth, research analyst and author of the report, said results of a survey of 180 investors in closed-end private real estate funds suggested the sector was yet to recover from the impact of the financial crisis, with managers facing a "challenging" fundraising environment.
Unsworth found that 53% were "unlikely" to make any commitments this year, while a further 11% had yet to decide.
She noted that the percentage of investors willing to consider private real estate funds increased when shifting focus to institutionals with more than $10bn (€7.6bn) in assets under management.
According to the report: "Larger investors are more likely to commit to private real estate funds in 2012. Fifty-one percent of investors with more than $10bn in total assets are likely to invest, compared with just 26% of investors with less than $1bn in total assets."
The investment outlook also found that investors based in North America were more likely to commit assets to a fund, with 41% expressing an interest compared with less than one-third of European investors.
Of those willing to consider future fund investment, more than one-third planned to commit to between one or two new vehicles, while just over one-fifth of respondents said they would consider 3-6 new funds.
Only 2% said they would consider more than seven funds, while the remaining 42% of respondents were unsure about how many new funds to which they would commit.
Unsworth said that, while only 36% of respondents were likely to commit new capital, many would consider investment on an opportunistic basis.
"Nevertheless, the results of the survey suggest fund managers look set to continue to struggle to raise equity in 2012," she said.
Examining funding in 2011, the company's February Real Estate Spotlight found that, while the number of fund commitments shrank over the course of the year, the average size of funds closing increased.
"Although the number of funds closing has declined, the average size of funds closing has climbed from a low of $174m in Q4 2010 to $434m in the last three quarters of 2011, indicating that large brand-name firms are still experiencing fundraising success in a challenging environment," the report said.