DESPITE the outbreak of COVID-19, investment managers raised $3.86 billion for non-listed funds investing into core Australian real estate during 2020 – nearly $800 million more than what was raised the previous year.
According to ANREV/INREV/NCREIF’s Annual Capital Raising Survey for 2021, the increase on 2019’s $3.08 billion raised is a very positive indicator that “core Australian real estate not only retained its appeal as an asset class but attracted even more capital than the year before”.
Globally, US$90.7 billion (AU$111.7 billion) of capital was raised for non-listed real estate funds in 2020, representing 60% by value of all the capital raised.
This represents a much higher percentage compared to previous years, confirming non-listed funds’ attractiveness as the most popular route to invest into real estate among investors.
Like many other metrics around property activity in 2020, industrial and logistics comes out on top. A vast majority of the funds raised for Australian core real estate strategies during the year – about 65% – will flow through to the sector, reflecting its increasing attractiveness amid an exponential boom in e-commerce.
“It is clear that investors are taking note of the country’s deepening e-commerce penetration, technology investment and heavy infrastructure investment, which are driving a boom in Australia’s industrial and logistics,” Amélie Delaunay, director of research and professional standards at ANREV said.
ESR and GIC’s recent $3.8 billion acquisition of the Milestone logistics portfolio from Blackstone set a new record for an Australian real estate transaction.
“Given the accelerated shift to online retail during the pandemic, it is reasonable to expect logistics and industrials will attract a large share of capital for real estate in the country going forward,” Delaunay said.
Office single sector funds raised 27% of the total capital raised for Australia core real estate funds, and the remaining 7% was destined for multi sector strategies.
The Asia Pacific region accounted for 71% of the capital raised, while a further 26% was raised from European investors and 3% from North American investors.
Of the Asia Pacific investors, 49% of the funds were raised from investors domiciled in Australia, while 19% came from those in Singapore, 11% from Japan and 22% from other markets in the region.
Pension funds were the dominant contributor to fundraising efforts for non-listed Australian core real estate funds, accounting for 34% of the funds raised in 2020. Among those, Dutch pension fund PGGM agreed to back Charter Hall on a new $800 million partnership, and it has just partnered with EG to give the local platform’s ACE fund more than $1.25 billion in investment firepower.
This was followed by insurance companies (21%), fund of funds (15%) and sovereign wealth funds (12%).
Global capital falls
While Australian funds enjoyed more investment during the year, capital raised for new non-listed real estate investments amounted to a minimum of US$150.7 billion (AU$195.5 billion) in 2020, compared to the record level of US$220.3 billion (AU$314.1 billion) in 2019.
European investors accounted for most capital raised for non-listed vehicles in 2020, representing 48% of the total. Asia Pacific investors became the second largest source of global capital in 2020, reaching a share of 30%, while North American investors’ share decreased from 31% in 2019 to 22%.
Investment managers are at their most positive about raising capital in the coming years. Some 76% are expecting an increase in near-term capital raising activity through 2021 and 2022, the highest share since the start of the global time series in 2015.
Delaunay said the amount raised in 2020 was lower than 2019 but should be seen as a normalisation of capital raising activity 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 an investment portfolio.”