Reprinted from Green Street's Real Estate Alert:
Download a PDF of this article.
Pension pledges to U.S. real estate vehicles hit their lowest level since 2017.
Commitments to funds and separate accounts from January to June totaled $17.11 billion, down 7% from the $18.45 billion pledged during the same period in 2023, according to Ferguson Partners.
But both years are nearly half the $32.57 billion corralled by investment managers in the first six months of 2022. And this year’s tally is the weakest first half since 2017, when just $15.43 billion of pledges were made.
“It’s good news that we haven’t seen further deterioration or decline in interest,” said Ferguson director Scott McIntosh.
Given that the timeline for raising capital can be well over six months, McIntosh says it’s likely the annual fundraising tally this year will be in line with 2023, when pledges totaled $32.68 billion, down from the high-water mark of $65.09 billion in 2022. Last year had the lowest tally since 2013 and the fourth-lowest year since Ferguson began tracking the sector in 2011.
“Whether we’re at the bottom, right before it, or right after, there is some optimism that capital markets will open up and transaction activity will increase,” McIntosh said. “But I don’t think it will change like a light going on. It takes time to prep strategies for this point in time. To get on the road, to prep materials, to have meetings and to have follow up meetings and then you land the commitment … and that assumes there is appetite.”