Preqin’s latest quarterly data reveals that Q1 2014 was the most successful quarter ever in terms of Europe-focused closed-end private real estate fundraising, with €8.8bn raised by nine funds, compared to €7.5bn in Q2 2008 and €8.2bn in Q2 2007. In the most recent quarter, Q4 2013, only €3.4bn was raised by seven private real estate funds targeting Europe.
Of the Europe-focused closed-end private real estate funds that closed in Q1 2014, 71% met or exceeded their targeted amount of capital, compared to 57% in 2013 and 47% in 2012, with funds also spending less time in market before holding a final close. On average, Europe-focused closed-end private real estate funds that closed in Q1 2014 took 17.0 months to close, a slight decrease from the average of 18.8 months spent on the road by Europe-focused funds that closed in 2013.
Strong fundraising in recent quarters also means private real estate fund managers have more capital than ever before to invest in Europe, at €40bn as of March 2014, up from the €32bn in dry powder available as of December 2013 and the €26bn available as of December 2012.
Fundraising success for Europe-focused private real estate vehicles is being driven by growing appetite for the region among Europe-based investors and those outside of Europe, with 34% of US-based institutional investors that are planning new commitments in the coming year targeting Europe, up from 17% six months ago. Forty-five percent of Asia-based investors planning new commitments are targeting Europe, up from 39% six months ago and 19% a year ago.
As of April 2014, there are 97 Europe-focused closed-end private real estate funds in market, targeting an aggregate €39bn; this is a slight decrease from the €41bn that was being sought by 107 funds that were on the road at the end of Q4 2013. In terms of strategy, a significant 29% of the aggregate target capital of Europe-focused closed-end private real estate funds in market is earmarked for primarily debt investments. This is perhaps a result of many believing that it is now an excellent time to invest in European real estate debt as increasing regulations and heightened scrutiny of banks is creating a funding gap in the real estate market.