GLOBAL - The private equity-style real estate funds sector continues to struggle to raise capital from investors, as the latest study from Preqin shows that only 89 funds reached a close in 2010, raising $35.8bn (€27.2bn) in the process.
This is the lowest annual total since 2003, when $14.1bn was raised, according to the data analysis providers.
It also represents a 28% decline from the $49.8bn raised in 2009.
Andrew Moylan, real estate data manager at Preqin, said: "2010 was another challenging year for the private equity real estate industry. Funds that did reach a final close spent an average of a year and a half on the road."
Funds with a primary focus on North America raised the most capital in 2010 - 45 funds raised an aggregate $22.5bn.
Europe suffered the most, with only 19 funds raising $3.4bn. Meanwhile, 24 funds focused on Asia and the 'rest of the world' raised $10bn.
Capital-raising programmes continued to take much longer last year than they had done prior to the crisis, with funds that closed in 2010 spending an average of 17.6 months on the road. By contrast, funds that closed in 2007 spent an average of 10 months in the market.
Fund managers continued to downsize capital-raising targets during 2010, with aggregate target of funds falling throughout much of the 12-month period.
But targets actually increased in the fourth quarter, possibly reflecting renewed confidence among fund managers in regard to future capital raisings.
Less than a quarter (21%) of funds that closed in 2010 met their fundraising targets, although 29% managed to actually exceed their targets. In comparison, in 2009, just 13% of funds met or exceeded their targets.
Moylan said: "There are some signs the fundraising market may be thawing, with a number of funds closing above their target, as some fund managers have been successful during 2010.
"Many other firms, however, have continued to struggle, delaying closes or raising far less capital than they originally targeted."
He added: "The increase in the aggregate target of funds in market does suggest renewed confidence among fund managers, but also serves to make the fundraising market even more crowded and competitive.
"It is clear there will not be enough new capital from institutional investors to satisfy the fundraising ambitions of all the vehicles currently on the road, and as a result, it is likely that we will see some consolidation in the private equity real estate industry in 2011."
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