Although private real estate funds often target a diversified range of property types for investment, with 53% of funds closed since 2008 doing so, many managers instead look to raise capital for funds focusing on a specific property type, such as residential real estate. Residential funds have accounted for 21% of all funds closed since 2008, the largest proportion of any property type, despite only accounting for 11% of all capital raised in this time.
Preqin’s Real Estate Online shows that there are 95 private real estate funds currently in market focused on the residential sector, collectively targeting $16bn in investor capital. Fundraising for residential-focused private real estate funds has remained consistently strong in recent years, with $8bn raised in 2011, $7bn in 2012, and $12bn in 2013. In 2014 YTD, $11bn has been raised, demonstrating the increasing confidence investors have in the residential sector and in fund managers to deliver returns.
In terms of location, North America is the primary location for residential-focused real estate funds in market, with 65 funds targeting $10.2bn in capital commitments from investors, accounting for 68% of the funds in market focused on the sub-sector. The European market for residential real estate is small, with just seven funds in market targeting aggregate commitments of $1.5bn. The Asia-Pacific region currently has 19 residential-focused funds in market targeting $3.6bn in capital commitments. Interestingly, of these 19 funds, 16 are targeting the Indian real estate market.
Strategically, the residential private real estate market is heavily biased towards value added and opportunistic offerings, with 34% and 40% of funds in market respectively utilizing these strategies. Closed-end core and core-plus vehicles make up 10% of funds currently raising.