Global capital raised for real estate investment soars by 25%

Capital raised for real estate investment by real estate investment managers soared to €152.3bn globally last year, up 25% increase on 2016, according to the 2018 Capital Raising Survey, published this month by INREV, ANREV and NCREIF.

In total, equity was raised for 895 vehicles, up from 733 the previous year.

Vehicles with a European strategy dominated once again, with €67.2b raised, an increase from €56.6b in 2016. Of this total, European non-listed real estate funds enjoyed a record year, accounting for €35.1bn.

‘By any standards, a 25% uplift is very impressive,’ said INREV’s CEO, Lonneke Löwik. ‘The survey tells a positive story about the continuing appeal of real estate for an increasingly broad spread of investors. And the seemingly greater diversity of capital sources will no doubt be reassuring in terms of protecting the industry against any future systemic risk.’

European funds are not the only ones feeling flush: global funds accounted for 10.4% of total capital, or €15.8bn. This was particularly the case in North America, where over half of all capital is earmarked for deployment outside the home region. North American vehicles have gained significant ground, up from €31.6bn in 2016 to €43.9bn last year. Vehicles in the Asia Pacific region increased the volume of capital raised from €21.7bn to €24.9bn.

Non-listed funds demonstrated an enduring appeal, with managers raising €83.9bn for these vehicles, reflecting the trend identified in the Investment Intentions Survey 2017. A smaller, but still significant, €31.6bn was raised for separate direct accounts. Joint ventures and clubs were the only vehicles to not see an uptick in the amount of capital raised.

Fund managers upbeat on capital raising

Overall, fund managers are optimistic in their expectations for capital raising activity over the next few years. The majority (69.1%) expected capital raising activity to continue increasing, in line with the result of the 2016 survey. However, an additional 10.3% expect capital raising momentum to decrease in two years’ time, up from 6.2% in 2016. The remaining 17.7% of respondents predicted no change to their level of capital raising activity, with just 2.9% undecided.

Regulation is not having an impact on capital raising in the non-listed real estate industry, according to 62.9% of those surveyed, up from 55.6% in 2016 and 50.3% in 2015, suggesting the growing immunity of capital raising to regulation. Still, around 20% of respondents see regulation as a deterrent to raising new equity.

Investor mix shifts

This time, the survey revealed a shift in the balance of capital sources with more corporations and non-traditional investors, including high net worth individuals and families, increasing their share of capital raised. Subsequently, there was a proportional decrease in the percentage of capital coming from pension funds and insurance companies. Together, these historically dominant sources of capital accounted for 49% of the total. Government institutions accounted for an additional 4.8%, followed by HNWI (4.1%), sovereign wealth funds (3.9%),charities, foundations and non-profitorganisations (1.5%) and other investors (11.5%), with the remaining 21.2% not being reported. (ssk)