The H1 2013 edition of Preqin Investor Outlook: Real Estate has found that the proportion of investors planning to make commitments in the following 12 months has increased from 36% in January 2012 to 53% in January 2013. This growth in appetite followed a period of decline in the proportion of investors that expected to make commitments from January 2010 to January 2012. The results suggest that investors are starting to regain confidence in the asset class and, as a result, fundraising may increase in 2013.
The improvement in private real estate performance in recent quarters has encouraged some investors to seek new commitments, while increased transaction activity among fund managers means many investors are seeing more capital distributed from older commitments, which can be allocated to new funds. Closed-end private real estate funds distributed $41bn in the first half of 2012, compared to $48bn in the whole of 2011.
Investors based in Asia are set to be the most active, with 83% expecting to make new commitments in 2013, a similar proportion to the number that invested in private real estate funds in 2012. Forty-eight percent of investors interviewed based in North America were planning to commit to private real estate funds in 2013, and 39% of Europe-based investors interviewed said that they would invest in private real estate funds in 2013.
Larger investors will typically have capital invested in real estate funds and will need to make investments more frequently to maintain their allocations. As would be expected, larger institutions are more likely to be planning new commitments in 2013, with 69% of investors with $10bn or more in assets under management expecting to invest in 2013. In contrast, approximately 45% of investors with less than $10bn in assets do not expect to make new commitments, while a further 9% may commit capital to real estate funds.