The volume of capital raised globally for non-listed real estate vehicles fell slightly in 2016, it was revealed today at the annual conference of the European Association for Investors in Non-listed Real Estate Vehicles (INREV).
Henri Vuong, director of research and market information at INREV, said the 1.4% drop on 2015 fundraising levels could be related to the ability of fund managers to deploy the money.
“Investors could be sensing a turning point on the back of the longest cycle we’ve witnessed in recent years”
She said the €122bn in total capital raised was “still significant” but the drop-off “might reflect the challenges of deployment and a more generally cautious approach to capital raising from fund managers”.
The Capital Raising Survey 2017 – published by INREV and its Asian and North American counterparts ANREV and NCREIF – showed that close to half of the capital raised (46.5% or €56.6bn) was for vehicles with a European strategy.
Just over a quarter (26% or €31.6bn) was raised for North American-focused vehicles, and 17.8% (€21.7bn) was raised for vehicles with an Asia-Pacific strategy. The latter represented a significant uplift from last year’s €16.9bn.
Despite the global reach of the survey, the majority of investors (49.6%) were domiciled in Europe. Pension funds and insurance companies were the dominant investor type, representing a combined 62.5% of the total.
The largest share of new capital raised came via fund managers’ existing relationships, accounting for €94.3bn of the total raised.
This trend was particularly prevalent among fund managers in North America where direct relationships accounted for 90.5% of all capital raised. It was 70.7% in Europe and 59.9% in Asia Pacific.
Fund managers in Asia-Pacific were alone in their significant use of placement agents, which accounted for 25.6% of the total equity raised in the region. In North America and Europe this percentage was less than 5%.
In line with previous years, the largest share of capital (49.9%) was raised for non-listed real estate funds.
Separate accounts took 23.4% of all new capital; joint ventures and club deals attracted 13.8% of capital; non-listed debt products, separate accounts investing in indirect vehicles, and funds of funds picked up 6.9%, 3.5% and 2.5%, respectively.
Non-listed real estate funds with a global strategy were deemed the most popular, attracting 48% of total capital.
Two-thirds (65.5%) of capital raised for European non-listed real estate funds was for vehicles with a multi-country strategy – a significant shift from 2015 when over half of the capital raised (53.3%) was destined for single-country vehicles.
INREV highlighted the dominance of retail-sector funds, which attracted 14.7% of capital – more than one-third of the total for single-sector funds – displacing residential (6.5%) from its top spot in 2015.
Office funds took 5.8% of total capital, while industrial/logistics took 4.1% and hotels 3.4%.
“The continued flow of capital into real estate is a clear vote of confidence in the asset class,” Vuong said.
“However, these results also signpost some potentially significant, if subtle, shifts in the market.
“Investors could be sensing a turning point on the back of the longest cycle we’ve witnessed in recent years.”