345 Park Avenue (Credit: Rudin Management)
New York’s real estate industry has plenty to worry about in early 2018, from rising interest rates to trade wars and a potential cyclical downturn. But strong private fundraising is an indicator that it might not get so bad after all.
A staggering $33 billion in new private real estate funds closed globally between January and March, according to research firm Preqin — the largest first-quarter volume in a decade. The figure only includes so-called closed-end funds, or investment vehicles with a fixed lifespan.
Preqin notes that it “expects these figures to rise up to 10 percent as more information becomes available,” and that the total could eventually surpass the record $35 billion raised in the first quarter of 2008.
Fund managers’ aggregate dry powder, or unspent capital commitments, rose to $266 billion in late March, up from $249 billion in December. Because closed-end fund managers have a fixed timeframe during which they have to spend their dry powder, strong fundraising should help prop up demand for real estate in the years to come.
Meanwhile, the fund management industry’s gradual consolidation continues as fewer new funds close, but each one raises more money. Just 47 new closed-end real estate funds closed in the first quarter, the lowest total since at least 2013 and a far cry from the 82 funds that closed a year ago.
The industry’s most successful quarter in recent years was the third quarter of 2015, when $43 billion worth of funds closed.
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