Preqin conducted extensive interviews with over 100 institutional investors in private real estate during June and July 2012. In order to give an indication of the fundraising outlook for the coming year, investors interviewed were asked whether they planned to commit to private real estate funds in the next 12 months. Results show that investor appetite for these funds has increased – 48% of investors interviewed in August 2012 are likely to commit to funds in the next 12 months, compared to only 36% of investors asked the same question in January 2012.
Thirty-six percent of investors surveyed are unlikely to commit to private real estate funds in the next 12 months, while a further 17% remained undecided. Given that over half of investors surveyed in January 2012 stated that they were unlikely to consider a commitment to private real estate, current trends suggest that increasing investor appetite could lead to increasing momentum in the private real estate fundraising market.
Investor intentions towards future commitment levels to private real estate funds vary by geographic location and assets under management. Larger investors are more likely to commit in the next 12 months, with 70% of investors with $10bn or more likely to invest. Only 26% of investors with assets under management of less than $1bn are looking to commit in the same time period. Smaller institutions make investments less frequently and may be more likely to halt investments in uncertain market conditions.
Asia and Rest of World-based investors appear to have a greater appetite for new investments than North American and European counterparts, with 72% of Asia and Rest of World-based investors are likely to commit to private real estate funds in the next 12 months. Forty-seven percent of North American investors are likely to commit to funds in the next 12 months, and only 32% of investors from Europe likely to consider fund commitments in this period. European investor appetite is possibly being affected by a number of factors, such as the European sovereign debt crisis and increased regulation.