The private real estate fundraising market is currently very competitive, with a record 514 funds in market looking to raise $173bn in institutional investor capital. Driving this is the level of institutional appetite for real estate: a significant 64% of fund managers have seen an increase in investor appetite for real estate over the last 12 months.
However, the experiences of real estate firms varies by size; the smaller the firm, the more likely they are to have witnessed a significant reduction in investor appetite over the past year, while the largest firms have seen the greatest increase in investor appetite. This correlates with recent fundraising trends, whereby the larger, more experienced fund managers have secured the majority of capital.
Over half (55%) of fund managers are seeing more appetite for real estate investment from family offices, although notable proportions of respondents also saw greater levels of appetite from other investor types. Furthermore, a majority of respondents have seen greater appetite for real estate investment from Asia- (58%) and North America-based (51%) investors over the last year. Seventeen percent of surveyed fund managers have seen reduced appetite for real estate from investors outside the established regions, the largest proportion witnessing a reduction in appetite across any region.
While investor demand is encouraging firms to launch new offerings, this has led to record levels of funds in market and the industry has become increasingly competitive. Nearly three-quarters (73%) of those surveyed have seen an increase in competition for investor capital compared to 12 months ago.