Preqin conducted interviews with 140 private real estate investors in July and August 2013 to investigate investor activity in private real estate in the last 12 months; the results were featured in Preqin Investor Outlook: Alternative Assets, H2 2013. The results show that the proportion of investors making new private real estate commitments decreased in the last year, with smaller investors less likely to have made commitments. There were also significant regional variations, with Asia-based investors the most active and North America-based institutions the least active.
Forty-two percent of investors interviewed made private real estate fund commitments in the last 12 months, a substantial drop from both the 54% of investors that stated they had made commitments when interviewed in August 2012 and the 49% that stated the same in December 2012. While these figures may suggest a decrease in investor appetite for private real estate funds, it should be noted that the 42% of respondents that have made commitments in the last 12 months is still an increase on the 34% of investors interviewed in December 2011.
With the continuing economic challenges in Europe and North America, many real estate fund managers are seeking to widen their search for capital to include Asia-based investors. Recent changes in regulations have encouraged many institutions based in Asia to shift their focus from traditional investments to alternative asset classes in order to diversify their portfolios. As a result, investors based in Asia were the most active in the private real estate market in the last 12 months compared to their North America- and Europe-based counterparts, with 62% committing to at least one private real estate fund. In comparison, 41% of Europe-based investors committed to funds in the last 12 months, followed by 38% of North America-based institutions.
Institutional investors with $10bn or more in assets under management were more likely to have committed to private real estate in the last 12 months, with 67% of these larger institutions being active in the private real estate market. Conversely, the majority of respondents with less than $10bn in assets under management (65%) did not make a commitment to a private real estate fund in the previous 12 months.