How did the past few years of major disruptions affect investor activity in the U.S. real estate market? A recent report from London-based research firm Preqin, Real Estate in the U.S. 2023, provides a snapshot.
Here are some major takeaways from Preqin’s findings:
- In spite of interruptions caused by the COVID-19 pandemic and more recent tightening in the capital markets brought on by rising interest rates, U.S. real estate assets under management continued to expand in 2022, reaching almost $1 trillion in September of last year—or two-thirds of global real estate assets under management. Slightly more than $284 billion of that figure included dry powder, while unrealized value accounted for roughly $672 billion. By contrast, at the end of 2013, there were about $390 billion in U.S. real estate assets under management. At the end of 2019, just before the pandemic started, the figure was $618 billion.
- As of May 2023, there were almost 1,400 active fund managers in the U.S. real estate space. That was an increase from 1,338 fund managers active in 2021 and 1,074 active fund managers in 2019, before the pandemic.
- As of fourth quarter 2022, aggregate U.S. real estate fundraising totaled $26.3 billion over 100 funds. This marked a decline from $63.1 billion in fundraising over 126 funds raised during the same period in 2021, which was a record for the industry. However, it was close to the average of $26.9 billion in quarterly fundraising for the 2019-20 period.
- With the slowdown in property investment sales in the second half of 2022, both the aggregate value and number of U.S. real estate deals completed for the year declined from 2021. The number of closed deals fell by 22%, to 4,916. Deal value declined by 19% year-over-year, to approximately $208 billion. Year-to-date in 2023, the U.S. market recorded 1,431 closed real estate deals, according to Preqin, with an aggregate value of $42.1 billion.
- The decline in transaction volume affected all major sectors of real estate. For example, the multifamily sector, while still seeing the highest deal volume of any property type year-to-date in 2023 at $12.8 billion, still appears likely to fall short of the full-year total of $81.2 billion reached in 2022. Industrial deal volume year-to-date has totaled $10.2 billion, compared to the full-year total of $27.9 billion last year. The one property type that appears like it might see stable deal volume in 2023 is land, with $1.6 billion in deals year-to-date. For the full year 2022, there were $3.2 billion in land deals.
- Private equity firm the Blackstone Group remained the most active buyer of U.S. real estate for the past four years, between 2018 and 2022, with 233 deals. Real estate investment firm Faropoint came in second place, with 216 deals. Multifamily-focused investment firm BH Equities (172 deals), publicly-traded industrial REIT Rexford Industrial Realty (167 deals) and investment manager Nuveen Real Estate (140 deals) rounded up the top five dealmakers for the period.
- The past year saw a significant jump in real estate funds focused on opportunistic, value-add and core-plus strategies. From December of 2021 to December of 2022, the volume of real estate assets under management that fell under the opportunistic strategy label rose by more than 33%, to $259.6 billion. The volume of assets under management in the “value-add” category went up by 16.5%, to $239.8 billion. Assets under management in the core-plus category went up by 40.7%, to $44.7 billion. Assets under management pursuing other strategies, including real estate co-investment, core, debt and distressed, remained more or less stable.
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