Closed-ended private equity real estate funds in Asia Pacific have raised around $9 billion in capital since the start of this year, according to a report released by the property services firm CBRE.
This marks a substantial increase from the $3.2 billion in fundraising volumes recorded in the same period last year.
The majority of the fundraising however was for country-specific and sector-focused funds, according to the report titled ‘Asia Pacific Four Quadrants’ released yesterday. Logistics-focused funds in specific markets, including the Prologis China Logistics Venture 1; GLP Japan Development Venture II; Redwood China Logistics Fund, and several India-focused funds comprised 60 percent of the recorded capital raising volume.
The report said only a limited number of pan-Asia funds were able to reach an interim or final close in this period.
Furthermore, more managers are willing to move up the risk curve and raise more capital for value-add and core-plus deals as opposed to vanilla core. The report said seven value-add funds were raised in the region in the last five months compared with three funds raised in the same period in 2015. A growing number of core funds were also found to be adjusting their approach to look for core-plus opportunities instead amid intensifying competition for quality core assets in gateway cities. CBRE’s report estimates the challenge to only worsen as most of the funds now enter the deployment phase.
“Investors are concerned that existing funds are struggling to invest their current allocations. Fund managers with the ability to source deals will have a comparative advantage over those which do not,” said the report.
In such a scenario, the appetite for real estate debt-focused funds, with an investment strategy of deploying capital in residential development projects, is expected to grow further, especially in markets such as Australia and India.