INREV has said a total of €223 bn of dry powder among investment managers globally could lead to a rapid uptick in investment flows as the gap between willing buyers and sellers ‘continues to shrink’.
The property association for the unlisted sector revealed the findings of its fund manager survey 2024 in collaboration with ANREV and NCREIF.
The study found that dry powder at the end of 2023 stood at 8% of total global fund manager AUM. This is a €10 bn - or 26 basis points – year-on-year increase on the end of 2022.
Dry powder is highly concentrated in the upper quartile of fund managers by global real estate AUM, with €178 billion parked with the upper quartile.
Dry powder levels of fund managers in the lower quartile were only slightly lower than the previous year.
Iryna Pylypchuk, Inrev director of research and market information, said: ‘The substantial amount of dry powder could lead to a rapid uptick in investment flows as the gap between willing buyers and sellers continues to shrink.’
Top 10
Elsewhere in the study, it was found that global real estate AUM had fallen to €3.7 trn, and that the Top 10 held €1.9 trn of this.
The decrease of 3.8% on the previous year means global AUM has fallen two years in a row for the non-listed real estate industry, following the peak of €4.1 trn in 2021. This decline is reflective of falling values driven by the high interest rate environment and historic low levels of capital raising activity, which totalled only €117 bn in 2023.
However, at the fund manager level, the data show an increase in average AUM as larger managers take a bigger share yet. This rose to €38.8 bn in 2023 – up by 12.8% on the €34 bn reported at the end of 2022. This confirms an on-going concentration of capital among the larger fund managers globally, with scale and track record playing an even more important role in the challenging market conditions as investors seek to play safe, said Inrev.
Top 10 reshuffle
There was a reshuffle of the top 10 fund managers globally, most notably among the largest five managers. Blackstone, Brookfield Asset Management, and Prologis retained the first second and third positions in the rankings, respectively.
They were followed by Metlife Investment Management and UBS Asset Management in fourth and fifth place, respectively.
Following the acquisition of Credit Suisse, UBS Asset Management returned to the top 10 as the only new entrant on this list. ESR was the only Asian Pacific fund manager to make it into the top 10 this year.
In order of rankings, ESR, GLP, and CapitaLand Investment Limited topped the list of managers in Asia Pacific.
UBS Asset Management took the top spot in Europe, doubling its AUM from €48.2 bn in 2022 to €94.4 bn in 2023 largely due to the acquisition of Credit Suisse. Swiss Life Asset Management and Blackstone were in second and third place, respectively, as was the case in 2022. Patrizia and DWS moved up in the European rankings this year into respective sixth and eighth place.
Blackstone retained its position at the top of the list of North American fund managers with an AUM of €241.6 bn in 2023, some €44.1 bn ahead of Prologis in second place. MetLife Investment Management was third. Blackstone is the only fund manager to feature in the top 10 in all three regions (Asia Pacific, Europe and North America), as well as for global strategies.
Sources of capital
Pension funds and insurance companies continue to serve as the primary sources of equity for global real estate, collectively representing 59% of the total capital allocated to the asset class. At a global level, there were no major shifts in sources of capital, with 2023 seeing a continuation of trends that started in 2022 or earlier.
Sovereign wealth funds, however, experienced a small decrease in their global contribution to the real estate market, accounting for 8.5% of the global capital flows in 2023 (9.1% in 2022). This was largely due to their reduced activity in the Asia Pacific market, from 21% in 2022 to only 17% last year. Instead, the region saw a notable increase in interest from government institutions, as their share tripled from 2.2% in 2022 to 6.3% at the 2023 year-end.