This article is from the Australian Property Journal archive
GLOBAL real estate transactions rebounded across North America, Europe and Asia-Pacific (APAC) in anticipation of that central bank are ending the monetary-tightening cycle.
According to the Preqin Global Report 2025 Real Estate, APAC was the standout region, with significant growth in real estate deal flow fuelled by an increase in the number of transactions.
While North America – known for commanding a significant portion of the global deal value – experienced the slowest growth in aggregate deal value, at a relatively modest 5%, during the first three quarters of 2024.
By Q3 2024, the residential sector, which makes up the largest share of North America’s deal value, fell by 3% compared to the same period in 2023. This decline marks the second consecutive year of reduced residential contributions to the total regional deal value.
Henry Lam, associate vice president, research insights, at Preqin said the market sees indications of an improving landscape as the prolonged global monetary-tightening cycle, spanning nearly three years, appears to be nearing its end with major central banks announcing interest rate cuts.
“Expectations of this shift sparked activity in the real estate capital market,” he said.
Having said that, fundraising moderated slightly in 2024, as total capital raised by the same period hit 61% of last year’s total, or US$96 billion.
The aggregate capital raised from the first quarter to the third fell behind the same period in 2023 by 22%, with no closures of funds exceeding $10 billion, as seen in the previous year.
Lam sees this as an indication of investors being in a ‘wait-and-see’ mode.
However first-time fundraising rebounded from a low base.
Lam said the data indicates a potential rise in investor risk appetite when it comes to fund selection.
“It is worth noting that the later-than-expected US rate-cut may have delayed the pace of investors’ deployment of new capital to funds in this year’s report. Investors are altering their allocations in terms of strategy and risk exposure to cater to this expected lower-interest-rate market cycle,” he added.
Following a significant drop of over 70% in aggregate capital raised in 2023, first-time private real estate fundraising rebounded in 2024. By Q3 2024, aggregate capital raised by first-time funds already surpassed 2023’s full-year total by $1.7 billion, reaching $6.8 billion.
The ability of first-time managers to close larger funds narrowed the difference between first-time and experienced funds when it comes to average size. This was $136 million in 2024 – the second lowest level of the last 10 years.
“Despite this, overall investors concentrated their allocations with larger managers who can carry out higher degrees of diversification within their portfolios, with a view to mitigate market risk. The top 10 real estate funds maintained a 38% share of total capital raised from 2023 by Q3 2024, reaching $36 billion.
Meanwhile capital raising in core real estate was the outperformer. It is the only real estate strategy to raise more capital by Q3 2024 than in 2023, reaching $12 billion.
Opportunistic led fundraising in 2023, securing 43% of total capital raised by real estate funds ($52bn) in the first three quarters of the year. However, value-added has demonstrated strong resilience and overtaken opportunistic this year, accounting for 37% ($36bn) over the same period.
An analysis comparing the performance of private real estate funds to the S&P North America REIT Index total return index reveals a weak correlation between the two indices. From the data of Preqin and S&P Capital IQ, the average quarterly return difference of -3.8% (between Q1 2012 and Q2 2024) highlights the shortcomings of the REIT index in accurately representing the long-term returns of its private counterparts.
With direct investments by local investors representing three of the top five largest deals in Europe by Q3 2024, total deal value for LPs’ direct investments in the region jumped by 175% from the 2023 annual total.
“In expectation of upcoming rate cuts triggering a recovery in valuations, these substantial deals underscore investors’ aspirations to future real estate potential,” said Lam.
