As shown in the chart below, the first half of 2015 has seen high levels of capital raised for core real estate vehicles; 10 funds have raised $6.1bn, up 35% on 2014’s fundraising total and surpassing annual fundraising values for every year since 2007. However, while capital raised has increased year on year since 2013, the number of core private real estate funds reaching a final close has reduced by 72% since 2012. Should fundraising continue to perform at these levels, then core private real estate funds could come close, or even surpass, the record totals witnessed in 2006.
The average amount of capital raised per fund has nearly doubled from $321mn in 2014 to $610mn in 2015 so far, which could suggest that capital will become more concentrated among fewer, more experienced managers as the year continues. GLP US Income Partners I is the largest core fund to close in 2015 so far, having raised $3.2bn, which is over half of the total capital raised by closed end core real estate funds in 2015. The US-focused vehicle, managed by Global Logistic Properties, invests in high-quality logistics properties in locations with higher barriers to entry.
So far this year there has been an institutional demand for core vehicles targeting North America, with four of the 10 funds closed focused on the region, raising an aggregate $3.8bn. Naturally for this strategy, investors are showing a clear preference for developed economies, with the US, France, Japan, Australia, Canada and the UK the sole focus of 80% of closed core vehicles this year.
Funds primarily targeting office properties are favoured among core private real estate investors; three funds of this nature have closed since the beginning of 2015. Industrial and residential property were the main focus of two funds that reached a final close, and funds with a diversified focus and hotel- and retail-focused vehicles each raised one fund.