The amount of fundraising by European private real estate funds plummeted by 50% in 2022, compared to 2021, according to new data from Realfin, the London-based global real assets data, research, and intelligence provider.
The Realfin state of the market report 2022 reveals that this makes Europe the worst performing region in the world, compared to Asia and North America.
The report registered 75 funds reaching any stage of financial close in 2022 and $25.75 bn (€23.7 bn) in capital raised. The most popular sector for fundraising was diversified, with 68% of funds going into that sector.
For the first time, European fundraising was lower than Asian fundraising, which saw 79 funds raising $30.09 bn, a decline of just 6% over 2021.
Globally, the combined numbers show how the global real estate market has been impacted by the rise in inflation and the subsequent rise in interest rates, absence of real estate finance and falls in asset values.
The number of unlisted real estate funds to reach final close declined by 34.4% to 509 in 2022, compared to the previous year, while capital raised weakened by 26.3% to $182.26 bn.
The number of fund launches dropped by 46.2% to 508 and aggregate capital sought fell by 53.9% to $209.21 bn, compared to the previous year.
The total number of real estate transactions involving a fund or direct investor declined significantly by 33.2% to 5,463 in 2022, compared to the previous year.
The decline is outmatched in the past decade only by the 37.8% drop in volume seen in the thick of the pandemic in 2020.
Looking forward, Realfin’s investor intentions survey shows that a higher proportion of investors (17%) say they will lower their allocation to unlisted real estate in 2023 than was the case in 2022 (11%).
Riz Malik, CEO of RealFin commented: 'Our annual report shows that the global private real estate is alive but not quite well and, above all, unsure of itself as we enter 2023.
'The defensiveness that set in in the second half of 2022 has weighed heavily but it is now uncertainty that is governing. Unlisted real estate fundraising, investor commitments and transaction activity all declined in 2022 as a wait-and-see approach overshadows the market.'