Despite challenging conditions for private real estate fundraising in 2012, the H1 2013 edition of Preqin Investor Outlook: Real Estate found there were signs of increasing investment activity among institutional investors.
A greater proportion of respondents committed to private real estate funds in 2012 than in any of the previous three years. Forty-nine percent of investors surveyed made at least one private real estate fund commitment in 2012, a significant increase on the 34% of investors that made new commitments to private real estate in 2011. While there were still a large number of institutions which did not invest in private real estate in 2012, the increase in the proportion of investors making new commitments is a sign of renewed appetite for real estate funds.
The level of new investment activity seen in 2012 differed by geographic location. Asia-based institutions were the most active in 2012, with 86% of those surveyed by Preqin committing to private real estate funds during this period, compared with 48% of North America-based investors and 45% of Europe-based institutions. Institutional investors based in Asia have become more important sources of capital for the real estate asset class over the last few years. A shift in investor attitudes and changing regulations have allowed many Asia-based institutions to move away from traditional investments to focus more on alternative investments, and as a result many institutions are investing more capital in the real estate asset class.
Larger institutions were more likely to have made commitments in 2012, with 54% of investors with $10bn or more in assets under management committing capital to new funds during the year. Forty-five percent of investors with less than $10bn in assets under management made new commitments.