This article is from the Australian Property Journal archive
A WEAK global real estate market sapped capital raising activity by a whopping 51% in 2023.
However, the Capital Raising Survey 2024 from ANREV, INREV and NCREIF showed that the majority – or 75% – of investment managers surveyed, indicated that they still raised capital last year, affirming that real estate persists as an important asset class for investors.
Fund managers surveyed raised at least a combined US$129 billion over the year.
“Real estate investments have been challenged by market conditions that have deteriorated and by the high interest rate environment across the globe which has also favoured debt investments globally,” said Amélie Delaunay, senior director of research and professional standards at ANREV.
The findings showed a concentration of capital raising within a few investment managers. The top 10 managers raised 73% of the total surveyed capital, amounting US$94.3 billion. At the lower end, 37 managers raised less than US$1 billion.
Non-listed real estate funds still attracted most of the capital allocated to Asia Pacific strategies (39%). The trend towards joint ventures and club deals (up to 39% from 25% a year ago) may indicate continued preference towards seeking more control and strategy involvement for investments in Asia Pacific strategies.
Non-listed debt products emerged, accounting for 14% of the total capital raised which may reflect its attractiveness to investors in a higher interest rate environment, according to the authors.
Capital deployment as the share of capital raised in 2023 continued to slide, from 26% in 2022 down to 16%. This translated to a record high of 84% of the capital remaining to be invested, higher than the 74% in 2022 and 47% in 2021.
The down year in capital raised across investor domiciles for 2023 was across the board, with year-on-year declines for the amount of capital raised across investors from Asia Pacific down 55%, from Europe down by 41%, and from North America by 62%.
Despite the decline, Asia Pacific investors still accounted for 34% of the source of capital globally, mirroring 2022. However, the overall composition shifted to European investors as the main source of capital in 2023.
By strategy, core-style funds attracted 26% of the total capital raised in 2023. Riskier investment style accounted for 74% of the capital raised by non-listed real estate funds in the region, with 41% for opportunity funds and 33% by value-added funds. Across investor domiciles, capital raised for Asia Pacific non-listed funds is weighted towards opportunistic strategies.
Single-country and single-sector strategy funds respectively raised 71% and 64% of the total capital raised for Asia Pacific non-listed funds in 2023. Funds following an industrial and logistics strategy alone raised 24% of the total capital raised for Asia Pacific non-listed real estate funds in 2023.
