Global Private Real Estate Fundraising Plunges 33% to 14-Year Low of $151B

Global private real estate fundraising in 2023 suffered its sharpest drop in 14 years, tumbling 33.1 percent to $151.3 billion, according to data provider Realfin.

The number of private vehicles reaching a final closing recorded the deepest decline of all time, plunging 43.5 percent to 473, London-based Realfin said in its State of the Market report released last week. The result continued a slide commenced in 2022, when the number of unlisted real estate funds reaching a final closing fell 34 percent to 509 as the amount of capital raised dipped 26 percent to $182.3 billion.

The number of real estate deals involving a private fund or investor reaching financial close slumped 30.8 percent last year to 3,778, with Asia Pacific transactions accounting for a mere 5.1 percent of the global total.

“Private Asia Pacific real estate fundraising declined significantly in 2023, though this was against a wider global backdrop of shrinking capital for the asset class altogether,” Realfin co-founder and CEO Riz Malik told Mingtiandi.

Hong Kong’s Gaw Stands Out

Among last year’s final closings of real estate funds, only one Asia Pacific firm cracked the global top 10: Hong Kong’s Gaw Capital Partners, with its Gateway Real Estate Fund VII ranking sixth.

The firm led by tycoon Goodwin Gaw raised $3 billion in equity for the APAC-focused opportunistic vehicle, overcoming challenges stemming from the pandemic and higher interest rates to close at well above its targeted $2.5 billion.

The fund’s investments include the acquisition of a Greater Tokyo logistics portfolio from private equity titan Blackstone and the $409.3 million purchase of the Hyatt Regency Tokyo in partnership with buyout giant KKR.

Manhattan-based Blackstone chalked up the year’s biggest final closing with Blackstone Real Estate Partners X, which raised $30.4 billion to make it the largest closed-end investment fund ever in the real estate or private equity sectors.

Sweden’s EQT Exeter placed a distant second with the closing of its $4.9 billion Industrial Value Fund VI, a value-add vehicle focused on acquiring, developing, renovating, leasing and operating logistics properties in the US.

APAC Closings Down, Deals Up

For real estate funds targeting Asia Pacific, 64 vehicles reached a final closing in 2023 to raise $13.6 billion in total, down from 116 vehicles and $35.6 billion in 2022.

Other notable closings in Asia included DNE’s $2 billion Offshore Development Venture, Qualitas’s $1.3 billion Construction Debt Fund II and Mirvac’s $1.2 billion Build to Rent.

Realfin’s Malik said Asia Pacific was the only region to see the number of transactions involving private real estate funds or institutions increase in 2023, rising 8 percent and led by Australia, Japan, South Korea and Singapore.

“This may not seem significant, but compare that to a 27 percent decline in North America and a 38 percent fall in Europe,” the CEO said. “Deals in Asia were distributed fairly evenly across asset types, though office, industrial, hospitality and retail were most popular. Office is especially interesting in the Asia Pacific context, where the return-to-office drive is expected to be more successful than in Europe or North America.”

While Realfin expects North America and Europe to continue attracting the most investor interest in 2024 in absolute terms, APAC markets including Japan, India, Australia, New Zealand, Singapore and South Korea feature prominently in Realfin’s investor intentions data covering plans for the next six to nine months.

“There is more investor interest in Southeast Asia, for example, than there is for Eastern Europe for investment plans among institutionals and private wealth investors in the coming months,” Malik said.