Fundraising by real estate investment managers hit a pre-pandemic high in 2021, but the conflict in Ukraine will put additional pressure on deployment strategies in 2022, according to an annual survey of real estate fund associations ANREV, INREV and NCREIF.
Capital raising activity in 2021 reached at least €254 billion globally for unlisted real estate investment, an increase of 107% from the €123 billion recorded in 2020. The latest figure also exceeds the pre-pandemic record of 196 billion euros in 2019.
More than three-quarters (76%) of executives expect capital-raising activity to increase over the next two years – although the timing of the survey makes it difficult to gauge how well participants have taken into account the invasion of Ukraine.
Capital raised for regional strategies increased in 2021, with North America getting €90 billion, up from €29 billion in 2020. Asia-Pacific grew 61% and global strategies tripled in during the period compared to the previous year. In Europe, total capital raised for unlisted vehicles over the period amounted to €73 billion compared to €51 billion raised in 2020.
Of total capital raised, a record 56% went to unlisted funds, “maintaining their position as the most popular route” to investing in real estate globally, according to the survey.
For the first time since 2017, the share of capital-raising activity for funds that follow a multi-country and multi-sector strategy declined, but they still raised more than half (51%) of total new capital targeting European strategies in 2021 .
According to the survey, the majority of capital raised for European strategies was for vehicles with a low-risk strategy.
Of the 55.4 billion euros raised in total, 72% was intended for core equity or senior debt strategies. While of the €43.7 billion raised for equity investing vehicles, €30.8 billion targeted core strategies. Value-added equity strategies attracted €8.6 billion in capital in 2021, while opportunistic equity strategies pocketed a total of €4.3 billion.
Iryna Pylypchuk, Director of Research and Market Intelligence at INREV, said: “The uptick in capital-raising activity in 2021 reflects pent-up demand built up during the most restrictive period of market closures. Covid-19 and an increase in investor appetite for the asset class.
“These results indicate a positive outlook for the real estate investment industry, despite the challenges investment managers have faced in terms of capital deployment, with nearly half of the capital raised in 2021 failing to yet been invested.
“And the complex geopolitical, economic and inflationary outlook will put additional pressure on decision-making and deployment strategies in 2022.”
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