In a year of tumultuous political events, total equity raising for real estate funds was 18% down at $130 billion for the year. Within this headline total there were some significant changes in fortune for the major markets Read more »
UK dives whilst Europe soars – is this Brexit impacting real estate fund equity raising?
31 October 2016
Whilst equity raised specifically for investment in continental European real estate by commingled real-estate-funds is currently up by nearly a third, the total targeting the UK has halved over the last 12 months.
Is this all down to Brexit?
Indirex, the real estate fund analysts, note that a number of issues were already weighing against investment in the UK in late 2015 including:
- Higher relative pricing
- The view that the UK (like the US) was further along into the cycle; and
- Broader based pan-European funds offering wider choice and so more options for managers.
But, clearly, Brexit related issues began to take centre stage from the start of 2016, like:
- Uncertainty, especially political and economic
- Currency concerns; and
- Worries about adverse impact on valuations
Over the last three months, since the Brexit decision in June, property values have, indeed, fallen by nearly 4% according to MSCI and the pound is more than 15% down against the dollar.
Over the period, fund raising directly for UK targeted funds has been almost non-existent.
Paradoxically, against this devalued market background, now could be an ideal moment for a recovery play. The dollar based opportunity funds have already been scouring the market for distressed sellers but, to date, there have been few opportunities forthcoming.
We wait to see if the UK begins to take a greater share of the cash from the European and Global funds that continue to pull in equity but have flexibility over allocations.
Whilst equity raised specifically for investment in continental European real estate by commingled real estate funds is currently up by nearly a third, the total targeting the UK has halved over the last 12 months. Read more »