The latest Global Real Estate Report sheds light on the strategy of investing in the Real Estate sector and provides new data on fundraising and the challenges of opportunistic investing.
The Private Real Estate sector suffered a significant blow in 2022 due to high interest rates and persistent inflation. Last year, private real estate funds raised $128.6 billion through 267 funds, a 28.4% decline from the previous year when $179.6 billion was raised by 549 funds. Dry powder saw a similar decline, falling from US$486.3 billion in 2021 to US$423.1 billion in 2022, a 13% drop.
Several factors, including rising interest rates and continued inflation, have contributed to the decline in private real estate funds, which have negatively impacted private market portfolios. Fundraising was particularly impacted in the second half of the year, with a 65.4% decline in funds raised from $44.4 billion in Q3 2021 to $15.4 billion in Q3 2022. In addition, there was a 27.8% decline in funds raised from $70.1 billion in Q4 2021 to $50.6 billion in Q4 2022.
2022 was also a tumultuous year for commercial real estate. The Green Street Commercial Real Estate Profitability Index - an index that measures both the prices at which commercial properties trade and the income from those properties - indexed to 100 in 2007, reached 129.3 for the European market and 159.6 for the U.S. market at the end of 2021, before falling to 113.9 and 134.4, respectively at the end of 2022.