Investors poured almost $3.7 billion (US$2.7 billion) into private real estate funds targeting Australian property in 2021, with fundraising up 14% on pre-pandemic levels.
The 2021 result marked the biggest year for fundraising since 2017, when about US$3.7 billion was raised, according to alternative asset data provider Preqin.
Real estate funds targeting Australian property raised about $2.8 billion (US$2 billion) in 2020 and $3.3 billion (US$2.4 billion) in 2019.
Property Funds Association CEO Paul Healy said investors were clearly confident in Australia’s property market.
“In addition, global allocations to Australia have increased, there are more offshore flows into Australia, which is seen as an attractive, relatively stable destination with a sophisticated, and growing, real estate market,” Healy said.
Healy said alternative real estate asset classes had broadened the range of real estate investment opportunities available to investors too.
“An interesting dynamic here is the way other sectors have emerged to complement the traditional commercial asset classes of retail, industrial and office property – recently we’ve seen strong allocations to the hotels sector, and we are seeing allocations to other sectors including aged care, student housing, and build-to-rent,” he said.
The surge in Australian real estate fundraising came as global property fundraising reached US$176.8 billion last year, down 1% to compared to the pre-pandemic heights reached in 2019.
Preqin said investors had been citing Asia-Pacific countries such as Australia and Japan as markets of interest because they offered the opportunity for both diversification and exposure to markets at various stages of the economic cycle.
David Lowery, Senior Vice President, Head of Research Insights at Preqin, said 2022 was set to be a better year for real estate, building upon a solid end to 2021.
“We believe that there are bright spots and a potentially positive few years ahead for both institutional investors and fund managers alike,” Lowery said.
PFA’s Healy said it was difficult to predict these things with absolute certainty, but there was no question commercial real estate was still favourable, even while it was expensive.
“The unlisted sector continues to grow and it will be fascinating to see more deals across the traditional and alternative property asset classes throughout 2022,” Healy said.
In 2021, there were 14 funds raising capital for Australian property, up from 11 in 2020 but lower than the 46 funds recorded in 2019.
Australian commercial property deals rose 69% year-on-year to a record $70.8 billion in 2021, according to Real Capital Analytics.