In the initial six months of 2023, the amount of money raised for real estate plummeted to $66.8 billion (€64 billion). This is a significant drop from the $159.5 billion amassed during the same timeframe in 2022, as per the H1 2023 Global Real Estate Report by PitchBook.
During this year, only 87 funds have succeeded in accumulating capital for real estate ventures. This is in stark contrast to the 476 funds that managed to do so last year. The report from PitchBook, a financial data and research firm, revealed that the first quarter of 2023 concluded with a mere $11.8 billion. This is the lowest quarterly sum since the third quarter of 2009.
The second quarter of 2023 ended with $55.1 billion. Interestingly, 55.2% of this amount is credited to a single fund—Blackstone Real Estate Partners X. This fund secured its position as the largest closed-end private real estate fund ever, with a closing amount of $30.4 billion. The next in line, NREP Nordic Strategies Fund V, closed at $4 billion, highlighting the vast disparity in fund sizes even among the largest funds that have closed this year.
PitchBook indicated that although fundraising seems to have decelerated, over 20 funds have been launched in the past two years targeting more than $1 billion. These large-scale funds are managed by key players like Blackstone, Lone Star, and Blue Owl. The firm suggests that if some of these funds manage to close in the upcoming quarters, private real estate fundraising could potentially revert to its historical levels.
As of the end of December 2022, there was $427.8 billion of “dry powder” available for private real estate investments. This marks an 8.8% decrease from the $469.1 billion available in 2021. However, it remains uncertain whether the fundraising figures for 2023 will be sufficient to replenish these levels, especially considering the challenges that both private and commercial real estate sectors are currently facing.
In terms of strategy, opportunistic funds have captured the majority of the fundraising, accounting for 60.6% of the total capital. On the other hand, core and core-plus strategies have only managed to raise $1 billion, making up just 1.6% of the overall capital. This is a significant reduction from 2022, when these strategies attracted $15.4 billion, which represented 9.6% of the $71.8 billion worth of U.S. properties that had reached a distressed level.