Real estate debt funds could raise more capital than value added funds this year, according to private equity research firm Preqin.
It said these vehicles were now taking a larger percentage of investor commitments than in previous years.
In 2007, real estate debt funds were responsible for 9% of the total value of funds raised. So far in 2008, debt vehicles have been responsible for 15% of capital raised.
Preqin said the growth in popularity of debt funds had been even more noticeable in recent months. Of the 14 debt funds that have closed this year, 11 of those have closed since May.
The research said debt funds could conceivably raise more capital than value added funds this year with value added and core-plus funds accounting for a “significantly smaller percentage” of the market in 2008.
Core-plus funds have accounted for 2.5% of capital raised this year, compared with 9% in 2007.
Value added funds have made up 20% this year, compared with 34% last year.
Opportunistic funds have also seen an increase, accounting for almost 60% of capital raised in 2008, compared with 43% last year.
Preqin said many of the biggest private real estate firms have shifted their focus towards the debt market, launching new vehicles.
It said Colony Capital had raised $900m (£511m) for its Colony Credit Opportunity Fund, targeting a range of debt-related investments.
Apollo Real Estate Advisors is raising $1bn (£569m) for a European debt fund, which will originate its own loans and buy deeply discounted property debt from banks no longer able to securitize loans.
There are a further 40 funds on the road allocating capital to debt investments, seeking a total $28.2bn (£16bn).
Among them is Goldman Sachs Real Estate Mezzanine Partners, targeting $2.5bn (£1.4bn) to invest in mezzanine loans, CMBS, B-notes and real estate corporate debt.
