With Asian investors leading deployment, 2022 saw the second highest level of capital raised for private real estate in the past decade despite the volatility in the macro environment, according to the Capital Raising Survey 2023 published by ANREV, INREV and NCREIF.
A total of $264 billion in capital was raised for private real estate in 2022, down eight percent from the $288 billion gathered in 2021, the highest level on record since the start of the survey. Having said that, capital deployment has not kept pace with capital raising. Only 26 percent of the capital raised in 2022 has already been invested – a significant decline from the 53 percent recorded last year.
Subject to tighter monetary policies that have driven up interest rates, both North American and European investors saw a significant drop in their levels of real estate investment. Capital raised from European investors fell the most – by almost 43 percent year-on-year – as the region was hard-hit by the denominator effect. Meanwhile, Asian investors represented the only regional group that invested more capital in private real estate in 2022 than the year before. Representing 35 percent of capital raised in 2022, the region is now the largest source of capital globally.
Asia-Pacific as a destination
As for inbound capital into Asia-Pacific, non-listed real estate funds still corralled most of the capital investing in the region. However, there was a significant uptick in capital allocated to joint ventures and club deals, which suggests an investor preference for more control and strategy involvement in APAC real estate strategies.
More investors are also shifting from higher risk funds to income generation funds in Asia-Pacific. Core strategies targeting the region overtook opportunistic to become the most popular option for investors, corralling 45 percent of capital raised in 2022. The report also noted that investors preferred single-country strategies over multi-country vehicles in Asia-Pacific.