Reprinted from Green Street's Real Estate Alert:
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U.S. public pension pledges to commercial real estate vehicles ticked down again in the third quarter, as the fundraising market continues to stall ahead of a potential recovery.
Some $7.10 billion was committed to funds and separate accounts from July through September, down 13% from $8.18 billion in the prior-year period, according to Ferguson Partners. That brought total pledges for the first nine months of 2024 to $24.20 billion, down 9% from $26.63 billion a year earlier.
The Federal Reserve’s recent interest-rate cut — and the expectation of more over the next year — have capital-raising pros, managers and investors expecting fundraising to pick up in 2025. But given that the process for pledges often takes six months or longer, 2024’s fundraising volume is expected to remain at a depressed level.
“Sentiment first, metrics to follow,” Ferguson director Scott McIntosh said. “There’s a different sentiment from two quarters ago as I think organizations in this space — both on the [general partner] side and the [limited partner] side — have more optimism.”
As a result, managers and pensions are preparing for a stronger fundraising year in 2025, McIntosh said.
“It’s putting an organization in the best position for a market that will hopefully look different two quarters from now,” he added. It’s “positioning themselves to take advantage of a market that’s hopefully going to shift in the right direction.”