Acceleration of real estate fundraising marks recoveryDigital Manager
Seismic shifts in the real estate sector since the outbreak of Covid-19 have sent businesses into overdrive, surely covering a decade’s worth of work and change in order to adapt to the new landscape carved out by the pandemic. The result has been an acceleration of industry trends at every level.
We have seen immediate consumer trends hastened by the direct impacts of lockdown measures, such as the rise in online shopping and shift to the digitised workplace. At a higher level we are also witnessing an acceleration of institutional fundraising and consolidation of capital among fund managers – which in terms of kickstarting the global real estate sector after a prolonged period of pause, is certainly worth our close attention.
Capital raising for real estate funds hit a new high of $151bn in 2019, overtaking volumes seen in 2008 when the global financial crisis started. Despite this, the number of vehicles reaching a final close in 2019 declined sharply, marking a 39% drop on the previous year. Real estate funds were getting larger, with the average size reaching $625m. The three largest funds raised $43.5bn between them, including the $20.5bn Blackstone Real Estate Partners IX, the largest real estate fund in history.
Recent months have shown concentration among the largest fund managers is greater than ever as a result of Covid-19, as Brookfield Asset Management and Blackstone Group Inc., the world’s two biggest investment funds, eye up opportunities as distressed debt grows.
In April this year, Blackstone finished raising a $10.7 billion fund to target European real estate, just as the Covid-19 outbreak began to take hold of global markets. Yesterday it was announced that Blackstone had tightened its grip on the crown of world’s largest real estate manager for a fourth consecutive year after property assets controlled by the New York-listed group surged to nearly €250bn. Similarly, in May, Brookfield Asset Management, the Canadian investment group and now second in line to the throne after Blackstone, launched a $5bn rescue fund for retailers that need extra capital to weather the headwinds of coronavirus.
Additionally, just yesterday, France-based Primonial launched its open-ended European real estate fund, targeting £1bn of social infrastructure assets, primarily healthcare real estate as well as some educational and affordable housing properties.
These new funds aren’t to be taken lightly – they represent huge commitments of capital to global real estate, and that’s not to mention the many smaller and medium-sized managers that will be looking to capitalise on more opportunistic deals as assets are revalued, with a view to building scale and expanding their geographic footprint as others take a more watchful approach.
It’s been a long 11 weeks for real estate in the UK since lockdown measures were introduced – and indeed even longer for businesses in Europe and further afield. Though in such a close-knit global industry, as we continue to see major funds play their hand, we must believe that things are looking up; that new investments are on the horizon, and that we will see an increasingly granular level of new projects emerging in the near future.