A record €161.7 billion ($182 billion) of capital was raised for investment into real estate around the world in 2018, according to the Capital Raising Survey 2019, published by ANREV, INREV and NCREIF.
Of the total raised, over half (€85.1 billion) has already been invested leaving around €76.6 billion yet to be deployed. This surge in capital flow reinforces an ongoing trend for capital raising, which 71.9% of fund managers expect to see continue into the future.
The survey reveals that, globally, a minimum of €154.8 billion of the new capital was raised for investment into non-listed real estate vehicles – slightly ahead of the previous year’s tally of €152.3 billion. Most – €69.4 billion (or 44.8%) – is headed for Europe; a third (or €51.3 billion) is destined for North America; and €22.5 billion is targeted at Asia Pacific. The remainder will be divided between global strategies and South American strategies at €10.6 billion and €1.1 billion, respectively. This high level of interest in non-listed real estate is underlined by the rise in the number of these vehicles for which capital was sought – up from 895 in 2017 to 933 in 2018.
There is some domestic bias, on a regional basis. European fund managers earmarked 81.4% of new equity raised for vehicles with a European strategy, 8.1% for global vehicles and 10.6% to be split between North America (7.9%) and Asia Pacific (2.7%). Fund managers in Asia Pacific plan to deploy 74.9% of the capital they raised in their home region. However, North American fund managers – some of the largest of which have a global reach with operations in all three key regions – will invest the least in their domestic market at 66.2% of new capital.
In total, 45.3% of all capital raised for non-listed real estate vehicles was destined for funds; while separate accounts (invested in direct) attracted 21.4%. Non-listed debt products seem to have regained some of their appeal, drawing 13.8% of capital – substantially more than the 8.1% raised the previous year. Joint ventures and club deals combined, accounted for 9.7% of total capital raised. This spread reflects the ever-growing range of non-listed real estate investment products.
Pension funds and insurance companies remained the two dominant sources of capital in 2018. However, while the contribution from pension funds accounted for the lion’s share of the total at 34.9%, insurance companies nearly doubled their commitments – up from 13.2% in 2017 to 24.5% in 2018. Notably, insurance companies accounted for 69.5% of all capital raised for non-listed real estate debt products. Sovereign wealth funds also increased their allocations accounting for 5.6% of the total equity raised, though still substantially down on the 10.8% reached in 2015 and 8.7% in 2016.
Henri Vuong, INREV’s Director of Research and Market Information, said: ‘This survey reaffirms evidence elsewhere that real estate is manifestly more than just ‘flavour of the month’. The continued record high volumes of capital flow suggest that, despite the challenges of deployment and the approaching late cycle, global institutional investors retain a firm belief in the long-term income and portfolio diversification benefits of this asset class, in general, and non-listed, in particular.’
The Capital Raising Survey 2019 records details of capital raising activity in the non-listed real estate industry during 2018. It provides insights subdivided by region, vehicle type and investment strategy. The 2019 release includes data from 203 fund managers – up from 175 in 2018 and a record high number of responses. Of these, 115 are domiciled in Europe, 46 in Asia Pacific and 42 in North America.