As private real estate investment was severely affected by the financial crisis, investment consultants and the clients they advise will play a pivotal role in turning around the fortunes of the asset class. Addressing any concerns and issues they have with the market would help accelerate the process. Investments in the asset class have increased slowly in 2010 and into 2011, and private real estate investment consultants were asked how much capital they plan to commit to private real estate in the near future.
The majority expect to commit more capital to the private real estate market than they did in 2010; 72% of consultants will either be significantly or slightly increasing their commitment level to the asset class. More than half of respondents plan to slightly increase the level of their capital commitments in 2011 compared to the prior year. Furthermore, 2% of investment consultants who had not considered private real estate for their clients’ investments in 2010 will do so in 2011. Some investment consultants (9%) will be slightly reducing their level of commitment to the asset class over the next 12 months, but none will be making any significant reductions.
Investment consultants were also asked about the key issues in the real estate market at the present time, ranking that which they viewed to be a key concern. Unsurprisingly, given current conditions, valuations of investments was most frequently cited with just under a quarter of respondents claiming this as an issue. The economic climate and the resulting volatility was also stated as one of the more prevalent issues in the market; this was stated by 19% of investment consultants. 2% of those surveyed stated that industry regulations and the alignment of interests between fund investors and fund managers were key issues in the private real estate market.
The analysis and data above comes from a recent survey of investment consultants carried out by Preqin to establish their current view of the various asset classes, and the outlook for the alternative assets industry over both the short and longer term.