Global PE in realty down 16% to $11 bn in Q3

Private equity real estate fund-raising declined by 16% worldwide in the third quarter of 2011 to $11 billion, according to research firm Preqin.

According to the firm, 17 private equity real estate funds garnered $11 billion from investors in the July-September quarter of the 2011 calender year, compared to $13.1 billion by 27 funds in the April-June period this year.

"The $11 billion which was raised in the third quarter represents a small decrease on the capital raised the previous quarter, although we anticipate the latest quarterly fund-raising figures to improve by around 10-20% as more information becomes available," Preqin Manager (Real Estate Data) Andrew Moylan said.

It seems that real estate private equity fund-raising has bucked the overall industry trend. At a time when total private equity fund-raising has fallen by almost half in comparison to the previous quarter, real estate remains an attractive proposition.

Overall, private equity fund-raising fell by 46% to $45 billion globally in the July-September quarter of 2011 from $82.8 billion in the preceding quarter.

In terms of geographical regions, real estate funds with a North America focus attracted the most interest in the July-September period of 2011, with six of them raising a combined $5.5 billion.

In addition, nine Europe-focused funds mopped up a total of $4.8 billion, while two Asia focused funds raised $700 million.

The situation is still not very encouraging for the sector as the average time taken to close the fund is now 16 months, as against 10 months in 2006 and 2007. In addition, the real estate market is facing tough competition, with 430 funds battling for capital globally.

Looking ahead, the report said that institutional investors in private real estate found that only 35% expect to make new fund commitments in the next 12 months, 49% are unlikely to invest and a further 16% have yet to decide whether they will be active in the coming 12 months.