Private real estate fundraising for the retail sector has seen a steady decline since 2011, when 14 funds closed with $4.7bn in capital. 2012 saw 11 vehicles close with an aggregate $2.9bn in capital commitments, while2013 saw investors commit just $2.7bn to 13 funds. This downward trend has continued in 2014, with only six retail-focused funds closing, raising just $1.8bn.
In the last five years, Europe-focused retail vehicles have raised $5.1bn through 17 funds, while US-focused funds have secured only $3.5bn, despite a greater number of vehicles(22) reaching a final close. Interestingly, Asia-focused retail vehicles raised more capital than US-focused funds over the same time period, with $3.6bn raised through six vehicles.
Preqin’s Real Estate Online service currently tracks 26 funds in market that primarily target the retail sector, collectively targeting $6.7bn in capital commitments from investors. Value added vehicles remain the most favoured by fund managers, with 11 funds currently on the road targeting $2.9bn. One such fund is ECE European Prime Shopping Center Fund II, targeting €750mn, which primarily focuses on assets in Germany, Czech Republic, Austria and Poland. There are also five closed-end core retail funds currently on the road, seeking $1.5bn in capital, and another five opportunistic vehicles looking for $1.2bn in commitments from investors.
As increasing numbers of diversified funds are brought to market, sector-specific funds, such as those focusing on retail investments, are declining in prominence. However, with a significant number of retail vehicles currently on the road, retail vehicles could rebound in 2015 after a largely underwhelming fundraising performance in 2014.