Global real estate AUM falls amid repricing pressure

Total global real estate assets under management has fallen for a second consecutive year on the back of market repricing, according to new research. Global real estate AUM fell by 3.8% to €3.7tn (£3.1bn) in 2023, according to the Fund Manager Survey 2024, published by ANREV, INREV and NCREIF. The figure is down from the €3.9tn reported at the end of 2022, and a peak of €4.1tn in 2021. The decline reflects falling values driven by the high interest rate environment and historic low levels of capital raising activity, which totalled a minimum of €117bn in 2023. However, at fund manager level, the data showed a 12% increase in average AUM to €38.8bn in 2023 – up by 12.8% on €34bn at the end of 2022. Researchers said the rise confirms an “ongoing 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”. Total AUM for the top 10 fund managers globally reached €1.9tn at the end of 2023. Average AUM per fund manager hit €189.6bn, up from €182.5bn in 2022. By size, Blackstone, Brookfield Asset Management, and Prologis remained the top three fund managers globally. Following the acquisition of Credit Suisse, UBS Asset Management returned to the top 10 rankings as the only new entrant in 2023, in fifth place behind Metlife Investment Management. UBS took the top spot in Europe, doubling its AUM to €94.4bn last year. Swiss Life Asset Management and Blackstone were in second and third place respectively. Dry powder stood at €223bn, accounting for 8% of total global fund manager AUM. That marked a €10bn year-on-year increase on 7.8% in 2022. Pension funds and insurance companies continued to serve as the primary sources of equity for global real estate, collectively representing 59% of the total capital allocated to the asset class. Sovereign wealth funds accounted for a smaller proportion of real estate spending, amounting to 8.5% of global capital flows in 2023 (9.1% in 2022). Iryna Pylypchuk, director of research and market information at INREV, said: “The latest results indicate a moderate decline of total global real estate AUM, albeit with interesting ‘growth pockets’ amongst larger fund managers and those smaller niche players taking advantage of their specialist proposition. “Meanwhile, the substantial amount of dry powder (€223bn, 8% of the global AUM) could lead to a rapid uptick in investment flows as the gap between willing buyers and sellers continues to shrink. Equally striking is that only European fund managers anticipate corporate merger and acquisition activity in 2024.” Image © Gerd Altmann/Pixabay