Private real estate is experiencing a lull in global fundraising for closed-ended funds. Despite an uptick in capital raised in Q2, the $47.94 billion raised by 88 fund final closes represents the lowest first half fundraising figure since 2013. Meanwhile, a substantial number of funds are falling shy of their targets as macroeconomic uncertainty continues into 2017.
Nevertheless, some regions are seeing an uptick. After a sluggish Q1 in which three funds held a final close raising $1.89 billion, Europe-focused funds gathered pace in the second quarter to bring half yearly fundraising to $18.44 billion. The bulk of this capital went to Blackstone’s mammoth Real Estate Partners Europe V, which closed on €7.80 billion last month. Kildare Partners, Orion Capital, and PGIM also raised $1 billion-plus funds targeting the region, while Blackrock closed Europe Property IV on target at €700 million – its first value-added fund since inheriting the series from MGPA in 2013. This fundraising spree resulted in over $5 billion more capital raised by Europe-focused funds than in H1, 2016.
North America remains the primary target for investment; $21 billion was raised by funds closed with a sole focus on the region in the first half of 2017, and an aggregate $100 billion is being targeted by funds in market. Multi-region funds accounted for 8 percent of fundraising for the half, down from 33 percent at the same point last year, though this can be attributed to the fundraising cycle.
The top 10 funds in market currently account for 17 percent of total capital targeted, up from 13 percent at the same point last year. The current ‘wall of capital’ in the real estate market is increasing competitiveness and managers that can demonstrate a proven track record are raising ever greater amounts of capital. This shift could result in a bigger fundraising gap between the strongest managers – who will typically have a large global footprint – and the newer, less-established fund managers.