(ATF) The year 2020 was one of unprecedented turmoil for the investment community. With the world working from home and quickly needing to move operations online, it looked as though there would be upheaval in real estate as firms abandoned office and retail space amid the worsening Covid-19 pandemic.
The reality, however, is that, even in the grips of the pandemic, investors were as bullish about Asia Pacific real estate investments in 2020 as they were before the outbreak began.
The data can be seen in our recently published ANREV/INREV/NCREIF Capital Raising Survey 2021, which shows that fund managers raised US$26.2 billion for real estate investments in the Asia Pacific region in 2020.
Keen followers of our research will note that this is less than the $32.6 billion raised for Asia Pacific real estate in 2019, but put in context with the funds raised in the years immediately before the pandemic, the amount raised in 2019 was a record-breaking sum.
Although this year’s figure amounts to a drop, it in fact reflects the levels raised in the immediate years before the pandemic, with $26.2 billion raised in 2017 and $26.9 billion in 2018. To raise similar levels of capital in 2020 as in 2017 and 2018 is actually quite remarkable, when one considers the great pressure real estate companies were under when Covid-19 started to spread globally.
The positive sentiment on real estate is likely to continue in the coming years, with investment managers globally telling us that they are more positive about raising capital in 2021 and 2022.
More than two thirds (76%) of investment managers are expecting an increase in near-term capital raising activity, which is the highest share since the start of our global time series in 2015 and compares to 69% in early 2020.
Another interesting trend is that Asia Pacific capital is now the second largest source of capital raised globally accounting for 30% of the amount raised in 2020 – surpassing North American investors for the first time, who were the source of 22% of capital raised. European investors remain the major source of capital raised in 2020.
Looking at the capital raised for Asia Pacific strategies by investment style for all non-listed vehicles (non-listed funds, joint ventures and club deals and separate accounts investing directly), core was the most attractive strategy in 2020, accounting for 41% of capital raised for all vehicles. Value added strategies accounted for 30% of the capital raised for Asia Pacific strategies, while opportunity strategies account for 15% and mixed strategies represented 14% of the capital raised.
Of the $150.7 billion of capital raised globally during 2020, non-listed real estate funds raised $90.7 billion in 2020. That represented 60% by value of all the capital raised and the percentage raised by non-listed funds in Asia Pacific in 2020 was even higher at 63%. This is a much higher figure compared to the previous two years, confirming their attractiveness as the most popular route to invest into real estate among investors.
In the survey, we further studied the breakdown of capital raised for Asia Pacific non-listed real estate funds. Core funds attracted 70% of the total capital raised in 2020, followed by value-added funds with 29%. The remaining 2% was raised for opportunity funds. Notably, funds with a core strategy raised a higher share of total capital raised as compared to the previous six years.
Australia attracted largest share
More than half of the capital was raised for single country funds (63%), with the remaining 37% being raised for multi-country funds. By breaking down the capital raised for single country strategies, Australia remained the country which attracted the largest share of all capital raised at 31%, followed closely by Japan (29%) and China (3%).
In terms of sectors, single sector funds attracted 60% of the capital raised while multi-sector funds attracted 40%. Some 50% of the total capital raised for non-listed real estate funds was raised for funds with an industrial and logistics single-sector strategy.
The source of the capital raised for APAC non-listed real estate funds is mostly regional, with 55% coming from APAC investors, 36% from European and 9% from North American investors.
All-in-all, this is encouraging data on investor appetite in the non-listed real estate space in Asia Pacific and globally. Although the overall amount raised dropped in 2020, it should be seen in the context of recent years, which indicate a normalisation of capital raising activity in 2020 rather than a sharp dip in appetite.
To raise similar levels of capital as in previous years during one of the most tumultuous years in living memory speaks volumes about the level of interest and healthy appetite for non-listed real estate as a component of investors’ portfolios.
# Amélie Delaunay is the Director of Research and Professional Standards at ANREV (the Asian Association for Investors in Non-Listed Real Estate Vehicles).