Real estate fundraising was hit hard during Q3 2020 as the full effects of the COVID-19 pandemic began to materialize. This marks a significant shift in a short period of time: Q2 data was relatively positive – in terms of aggregate capital raised, if not the number of funds closed. Compared with last quarter, both the number of funds closed and total capital raised reduced sharply in Q3.
Reflecting the market uncertainly, just $21bn was raised during the quarter, compared with $45bn in Q2. Often a key driver of investor activity, the retail sector faces significant uncertainty as shopping habits evolve. And since COVID-19, online shopping has represented a larger share of total shopping baskets. The shift by retail real estate owners toward experiential shopping centers means nothing if footfall is a fraction of what it was just a year ago and rent collection is proving difficult.
With fewer people working in offices, too, demand for office assets could fall. That said, this could be coupled with the need for additional space to accommodate new working practices.
Preqin data shows investors favored the more established and liquid markets of North America and Europe during Q3.
While overall capital-raising numbers are down, many fund managers have been successful in attracting new capital. More than one in five (22%) funds closed by the end of Q3 managed to secure greater than 125% of its initial target. Meanwhile, just 6% of funds secured less than 50% of their initial target. In such a tough fundraising market, it is taking longer to achieve those sums. During Q3, 24% of funds closed spent more than two years in market. Going into Year 2021 you can expect Fundraising for Real Estate and or other asset classes to take longer than normal.
John Denes – CEO – REO Capital, LLC – www.reocapitalllc.com