Closed-end private real estate funds look to be on pace to have raised a combined $127 billion in 2015, surpassing the $111 billion raised by the investment funds in 2014, according to Preqin, which tracks the alternative assets industry, including real estate.
With 492 funds currently in the market seeking to raise a combined $174 billion, the market remains competitive. However, Preqin noted, investor demand for real estate remains considerable, and the strong fundraising seen in 2015 is expected to continue well into 2016.
Although 2015 is expected to mark a fifth successive annual increase in investor commitments for real estate fundraising, there were signs of softening, noted Andrew Moylan, head of real assets products for Preqin, in its year-end report.
For one thing, the number of funds reaching a successful final close during 2015 is expected to be down from 2014, as more capital was concentrated among fewer fund managers. For many firms marketing funds, raising capital remains easier than finding good investments in a hot real estate market.
"Finding value is also a challenge for many firms. With real estate dry powder now over a quarter of a trillion dollars, fund managers have lots of capital available to invest, but finding compelling opportunities at attractive prices is a difficult proposition,” Moylan said.
2015 also saw dry powder in real estate funds hit record levels to stand at $252 billion at the end of the year, again reflecting both the strong fundraising market for real estate and the challenges fund managers face in putting capital to work.
Opportunistic and value added funds drove fundraising in 2015, securing $54 billion and $22 billion respectively in investor commitments.
North America dominated the real estate fundraising landscape in 2015, raising $71 billion with 100 funds closed focusing on the region.