Preqin research into the Asian private equity real estate industry shows that managers located in the region are driving fundraising and transaction activity, despite some of the largest global firms launching Asia-focused funds. In the period 2006-2008, international firms were a significant component of the Asia-focused real estate fundraising market, securing between 33% and 48% of the aggregate annual capital raised. However, as managers headquartered in Asia have developed proven track records, investors have allocated increasing proportions of capital to these domestic firms; such managers accounted for 90% of capital raised by funds closed in 2015, and 92% in 2016 YTD.
The majority of the Asia-focused real estate funds closed since 2015 operate strategies higher up the risk/return curve: 23 opportunistic funds have secured $11bn in investor capital, while eight value added vehicles have raised $2.9bn. Only seven core and core-plus vehicles have reached a final close, raising a combined $2.6bn.
Asia-based fund managers also account for the bulk of private real estate deal activity in the region: 17 of the top 20 deals to be concluded since 2015, including the three largest, involved domestic fund managers. The assets involved in these deals also show a broad range of risk/return profiles; the less developed, higher yield market in India represents a quarter of transactions announced since the start of 2015, while assets in the well-developed, lower yield landscape of Singapore account for the largest proportion (38%) of aggregate deal value in the same period.
The Asian private equity real estate marketplace is increasingly dominated by domestic fund managers, indicative of the growth of the industry in the region. A diverse market, Asia provides opportunities to invest in highly developed, lower yield markets such as Hong Kong and Taipei, as well as higher yield regions such as Mumbai and Delhi. However, deal prices and valuations remain a major concern globally, and therefore the expansion of the Asian market may attract a growing pool of international players. Asia-based managers will hope that their greater knowledge and understanding of real estate in the region will continue to attract investor capital, and that fundraising can once again approach the levels seen in 2006, 2007 and 2008.