Commitments to private real estate dropped significantly in 2023
Capital commitments from U.S. public pension funds to privately managed real estate vehicles amounted to $32.7 billion in 2023, marking the lowest fundraising volume recorded since 2013. Year over year, the total commitment volume decreased 50%. This decline in total commitment
volume was primarily driven by a 49% decrease in the number of unique commitments and a 2% decrease in the average commitment size compared to 2022. Q4’s total volume of $6 billion was the lowest quarterly total since Q3 2013, according to FP’s database.
2023 began with the collapse of multiple regional banks and concerns about a looming recession. As the year progressed, several factors contributed to a stagnant real estate market. Inflation concerns, paired with the Federal Reserve's rate hikes, led to increased volatility in market valuations and widened bid-ask spreads. Consequently, cautious investment managers, lacking historical transaction data for guidance, paused transaction activities as borrowing costs soared. According to Preqin's 2024 Global Report, deal flow from Q1-Q3 2023
only accounted for 35% of the annual total of 2022.
To continue reading, download a PDF of the 2023 Fundraising Year in Review.
For additional information, please contact Scott McIntosh.