02/13/2013 | By Carisa Chappell
The firm noted in a Feb. 13 release that in its latest survey of private real estate fund investors, more than half, 53 percent, revealed that they expect to make new commitments to private real estate funds in 2013. A year earlier, 36 percent of respondents indicated that they planned to make new commitments in 2012.
“There are strong signs that investor confidence in private real estate funds is returning,” said Andrew Moylan, Preqin’s manager of real estate data. “Not only has the proportion of investors planning new commitments increased, but the majority of investors are expecting to commit more capital to private real estate in 2013 than they did in 2012.”
Fifty-four percent of respondents said they expect to commit more capital to private real estate funds. Only 3 percent said they’re expecting to commit less capital, according to Preqin. Moylan also pointed out that very few institutions are reducing their real estate allocations in the next 12 months, while 39 percent expect to increase their allocations in the longer term.
The report noted that the growth in appetite followed a period of decline in the proportion of investors that expected to make commitments from January 2010 to January 2012.
With investors growing more comfortable since the financial downturn, Moylan said more are looking at opportunities higher up the risk-return spectrum. While investor interest in core real estate investments remains strong, he said the appetite for core-plus, value-added and opportunistic strategies is growing as well.
“There has also been increased investor interest in debt funds. Many investors have cited the attractive risk-return profiles as one of their reasons for investing in funds following a debt strategy,” Moylan said.
Thirty-four percent of investors reported targeting real estate debt funds in 2013, compared to 8 percent in 2012.
“The results of this study are encouraging for fund managers marketing real estate funds and suggest the fundraising environment will likely improve during 2013,” Moylan said. “However, with a large number of funds in the market and many investors still expecting not to be active, fundraising will remain challenging in the coming months.”