Preqin conducted interviews with 140 private real estate investors in July and August 2013 to determine investor activity in private real estate in the next 12 months; the results were featured in Preqin Investor Outlook: Alternative Assets, H2 2013. The findings suggest that fundraising will remain challenging in the coming year, with a smaller proportion of investors looking to make commitments in the next 12 months. Regionally, Asia-based institutions are again set to be the most active, and smaller investors are less likely to commit to the asset class.
The proportion of investors planning to make new private real estate fund commitments in the following 12 months has decreased from 53% in December 2012 to 40% in August 2013. Investor appetite for new commitments varies considerably by location. Asia-based institutions are overwhelmingly set to be the most active in the next 12 months, with 71% likely to make new commitments in the coming year. In comparison, only 35% of investors based in North America and 24% of Europe-based investors are likely to commit to private real estate in the next 12 months. Concerns over the eurozone may have affected the appetite of Europe-based investors, as well as recent regulatory changes and proposals.
Institutions with more than $10bn in assets under management are twice as likely to make new commitments in the coming 12 months compared to those with less than $10bn in total assets. Smaller institutions will typically make fewer commitments and therefore a significant 59% are unlikely to make new real estate investments in the coming 12 months.
When asked to state the key factors investors assess when seeking real estate fund managers, established track record was the most commonly cited factor, with 32% of respondents stating it as a key attribute; management experience and background was cited by 30% of investors. With a manager’s track record and experience the most important factors for investors when considering new relationships, first-time fund managers are likely to continue to find the fundraising environment extremely challenging.