Survey shows spike in institutional real estate interest
GLOBAL – Institutional investors' interest for real estate debt has jumped over the past 12 months, with more than one-third seeking to allocate capital to the asset class against 8% a year ago, research from Preqin shows.
The report found that, out of the more than 100 investors surveyed, 53% expect to make commitments to private real estate funds in 2013, while only 36% expressed similar views a year ago.
Larger investors are more likely to increase their allocation to the asset class than their smaller counterparts, Preqin noted, as 69% of respondents with $10bn (€7.5bn) or more in assets under management (AUM) expect to make new commitments.
By comparison, only 45% of investors with less than $10bn in AUM are seeking to allocate capital to the asset class.
Andrew Moylan, real estate data manager at Preqin, said: "While a large proportion of investors focused primarily on core investments following the financial downturn in 2008, many are now increasingly looking at opportunities higher up the risk/return spectrum."
Investor interest in core remains strong, he said, but there is also increased appetite for core-plus, value added and opportunistic strategies.
"There has also been increased investor interest in debt funds," he added, "and many investors have cited the attractive risk/return profile as one of the reasons for investing in funds following a debt strategy."
Value-added funds are being targeted by the largest proportion of investors, the survey said, with 55% of respondents seeking to follow the strategy, up from 45% a year ago.
Additionally, Preqin stressed that, on the debt side, 34% of respondents are targeting debt funds against 8% in January 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 market and many investors still expecting not to be active, fundraising will remain challenging in the coming months."