Fewer property funds managed to raise capital in 2019 despite there existing more capital in the markets according to data from Preqin.
Meanwhile, existing funds are getting bigger with an average ticket size of US$625 million. The world’s three biggest funds last year raised US$43.5 billion, with Blackstone Real Estate Partners’ ninth global fund attracting US$20.5 billion alone.
“So-called mega-funds continue to dominate the field as the big continue to get bigger,” said JLL’s Gianluca Romano, Head of Capital Markets Research & Strategy.
A total US$151 billion was raised in 2019, beating Preqin’s 2008 record of US$ 148 billion.
“It’s an environment in which there are less deals but more capital being raised,” he says. “How to find opportunities will continue to be a challenge for fund managers with capital to deploy.”
The data from Preqin shows that active capital fell for the first time since 2014, from US$331 billion to US$319 billion but undeployed capital remains well above long-term averages.
“It’s an environment in which there are fewer deals but more capital being raised. How to find opportunities will continue to be a challenge for fund managers with capital to deploy,” says Romano.
“Large scale deals and portfolios of scale are sought after at a time when just deploying in tranches of €50 million or €100 million is not going to do the trick,” he added.
The expert says there is a possibility of investors moving away from funds into separate accounts and joint ventures as institutional portfolios reach critical mass.
“Co-investments, joint ventures, separate accounts, and even direct investments are increasing in popularity,” says Romano.