Fundraising for closed-end private real estate funds hit a five-year low in the second quarter of 2019.
Forty-seven funds reached a final close, raising just $29bn (£23bn), which marks a sharp decrease from the $46bn secured in the previous quarter, according to Preqin’s Q2 fundraising update.
The quarter is also some way off the equivalent period of 2018, which saw 115 funds raise a combined $38bn.
Despite this, Stuart Taub, partner and real estate senior analyst at RSM, said the current cycle “still had some legs left”. He commented: “Recently we’ve seen changing macroeconomic factors at play in real estate, but many of these factors have led to increased activity in the market.
“Take the tariff and trade discussion in the US. As investors look to be more conservative and position themselves away from the public market, they look to real estate. In the year to May 2019 we’ve seen property valuations up 15%, compared to the S&P 500 which is down 10% over this period.”
Funds have favoured value-added and opportunistic funds, with 16 and 15 vehicles closed respectively. Debt funds also secured notable fundraising, though, as nine funds raised a total of $8.9bn.
Core and core-plus fundraising remained peripheral, collectively securing just $800m through the quarter.
Despite lacklustre top-level fundraising figures, many new private real estate funds have been set up and brought to market in the first half of 2019. As at the start of Q3, there are 797 funds globally seeking a combined $253bn from investors.
The number of funds on the road has jumped significantly from the 634 that were in market in January.
Just over half (52%) of real estate investors are planning to make a single new commitment to the asset class over the next 12 months, which is a notably larger proportion than the corresponding 37% in Q2 2018. At the same time, investors are also expecting to commit less capital.
The quarter saw a contraction in both the number and total value of private equity real estate deals, following a prolonged period of growth.
In Q1, 2,308 deals were announced at a total value of $108bn. By contrast, Q2 recorded 1,963 deals worth a combined $89bn, representing the lowest number of deals announced and the lowest total value since Q1 2017.
The slowdown was most significant in office, residential and industrial properties, where the number of deals was down by 13%, 15% and 30% respectively.
To send feedback, e-mail anna.ward@egi.co.uk or tweet @annaroxelana or @estatesgazette
