US-focused real estate debt funds have shown a large proportionate increase in dry powder since 2003, increasing from $7bn in December 2006 to $17bn as of August 2013, despite falling from to $21bn to $12bn during 2012. Private real estate funds focusing on debt as a strategy have seen significant growth in recent years, with the availability of finance declining, and fund managers stepping in to fill the gap left by the retreat of traditional lenders. Opportunistic funds primarily focusing on the US have seen an increase in dry powder since December 2010, increasing from $25bn to $33bn, while dry powder for value added investments has fallen from $32bn in December 2009 to $24bn in August 2013. Closed-end funds focusing on core or core-plus as a strategy have shown a relatively small increase in dry powder, from $3bn to $5bn.
As of August 2013, the largest proportion of dry powder for US-focused private real estate funds is held by fund managers headquartered in New York, with 31% of all uncalled capital commitments. California and Texas-based fund managers also hold a large amount of dry powder, with $14bn and $13bn respectively. The vast majority (93%) of all dry powder for US-focused real estate funds is held by fund managers based in the US, with only $7bn held by those based outside the US.
When looking at the amount of dry powder available for US-focused funds by property focus, it is clear that diversified funds make up the majority (63%), with these funds holding $53bn in uncalled capital. Funds solely targeting residential property make up 18% of available dry powder, with office, industrial and other types of property making up the remainder.
With fundraising for the private real estate industry in the US showing increasing signs of improvement, and the assets under management of US-based firms at an all-time high, the outlook for the industry is particularly strong. 2012 witnessed the highest levels of capital invested and distributed in US-focused private real estate since the financial crisis, indicating that fund managers are not only able to find suitable investment opportunities in US real estate, but have also been able to exit many investments, resulting significant distributions to investors. As capital is returned, investors are then able to re-invest this capital, which is likely to lead to further improvements in the fundraising market.