2011 was a challenging year for the private real estate industry and ended with another slow quarter in terms of fundraising. In total, 23 closed-end private real estate funds reached a final close in Q4 2011 having raised an aggregate $9.4bn. This is a 23% decline on the $12.2bn which was raised by 28 funds in Q3 2011. In terms of the annual figures, 2011 saw $44.4bn raised by 114 funds, a small decline on the $45.4bn raised by 142 vehicles during 2010.
North America-focused funds raised the most capital in Q4, with 16 funds garnering $7.3bn. Elsewhere, six Asia and Rest of World-focused funds closed on an aggregate $1.6bn, while just one Europe-focused fund reached final close, raising $500mn. Carlyle Realty Partners VI was the largest real estate fund to close in the quarter, with the North America-focused vehicle raising $2.3bn from investors.
During 2011 63 primarily North America-focused funds closed, having attracted an aggregate $28.1bn in capital. A total of $8.9bn was raised by 26 European funds, while 25 Asia and Rest of World-focused funds raised $7.4bn. The $5.5bn Lone Star Real Estate Fund II was the largest fund to close during the year.
While some firms have had considerable success in the fundraising market, many others have had to delay anticipated closings. With a record number of funds on the road, and 53% of investors unlikely to commit to new funds in 2012, fundraising is set to remain extremely challenging in the coming year. Fund managers will need to ensure their offerings stand out from the crowd if they are to raise capital from a cautious investor community.