Investors’ Confidence and Activity in the Real Estate Asset Class - September 2015

by Jeanne Kroeger

  • 09 Sep 2015
  • RE

Preqin Investor Outlook: Alternative Assets, H2 2015 found that the majority of surveyed real estate investors (57%) had a positive perception of the real estate asset class, a large change in sentiment from the 37% that felt this way at the end of 2014. Driving this change is the 39% of investors that felt that their real estate investments are exceeding their expectations, an increase of six percentage points since December 2014, and significantly higher than the 3% who felt this in December 2012. 

This positivity towards the asset class can also been seen through investors’ desire to increase their exposure to real estate over the next 12 months. Over three quarters (78%) of respondents expect to commit the same amount of capital or more to real estate in the coming year in comparison to the previous year. Additionally, investors appear committed to the asset class in the longer term with 89% of respondents looking to maintain or increase their allocations to real estate. 

Many investors will be committing a significant amount of capital over the next year; 49% of surveyed investors are planning to commit $100mn or more to private real estate vehicles in the coming year, with 8% targeting $600mn or more. The number of funds active institutions will be looking to commit to is also significant, with over a third expecting to make four or more fund commitments. Furthermore, the majority (60%) of investors are looking to maintain the number of fund manager relationships they currently have, while a greater proportion of investors (29%) are looking to increase the number of fund manager relationships they hold in comparison to those looking to reduce them (11%). 

Larger institutions are more inclined to be active in the asset class in the next 12 months. Of those surveyed, 54% of investors with at least $10bn in assets under management (AUM) expect to make, or are considering making, new fund commitments in the next year, compared 46% of those that have less than $10bn in AUM. Encouragingly, the gap between small and large institutions that are investing in real estate has reduced since the end of 2014. This indicates that a wider range of institutions are participating in the asset class.

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