2016 - a year of diverging fortunes in the real estate fund world
09 March 2017
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
The year in a snapshot:
- Total global raising down 18% on previous year at $130 billion
- Raising for funds switched away from the stalwarts of the US and the UK towards Europe and more recently, Asia Pacific.
- North American focused funds ended the year down 36% on the previous year, whilst
- European targeted funds were up by 44%, seemingly avoiding Brexit fears.
- It is a different story for the UK where equity raised for British based property funds has fallen away dramatically; down by more than a half over the year, with a total of just over $5bn raised.
- To keep markets guessing, however, in recent months raising levels in Europe, have seen a tick down, possibly as Europe's own political uncertainties unravel.
- Conversely, the first few months of 2017 have seen a small tick up in the amount of cash raised in the US as the Trump administration settles in to the Whitehouse.
- "Global" funds with a broad geographic remit have continued to attract cash.
Interesting observations in the chart above.
- As in 2008, North America and Europe raisings are on a par again with the UK significantly behind.
- North America has been falling continually since late 2014.
- Europe fell away at this time but saw a marked turn around in 2016 as markets felt the early recoverers were now fully priced.
- The UK, too, has been continuously falling but from a later date in 2015.
Questions for the year ahead.
- Is the US on the cusp of a turn around? Raising levels haven't been this low since before the global economic crisis. Have the first few months of a Trump administration rebuilt some market confidence and do his proposals for economic stimulus offer promise for US real estate?
- Can Europe continue to attract cash when this year will see a raft of national elections and the Greek debt crisis rumble on? If investors dislike uncertainty, there sure is a lot around in Europe.
- Will Article 50 be triggerd by the UK in March? What will this mean for property funds? At the moment, the currency collapse means the sovereign wealth funds and HNWs seem happy to fill the funding gap left by the funds. Is the City secure or will a post Brexit Britain dominate innovation in the brave new world?
With MIPIM fast approaching, these questions certainly provide some good debating material. Answers on a postcard,please, before Tuesday! Or let's catch up while we're there.