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27. April 2012 
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Private Equity Real Estate off to a humble start in Q1 2012
Following a quiet fourth Quarter in 2011 when only 45 new funds were launched, the beginning of 2012 depicts a more optimistic picture. According to a current report of Swisslake, in Q1 2012 a total of 68 funds with a target equity of USD 27.3bn were launched. Nevertheless, the beginning of 2012 is less optimistic than the first quarter of 2011 when 79 funds with a target equity of USD 34.8bn. were launched worldwide. In other words, compared to Q1 2011 this reflects a decline of 13.9% in terms of the number of funds and a 21.6% decline in terms of the target equity. In addition, while looking at the long-term average figures (2005-2011) that reflect 70 funds per quarter and an average target equity of USD 32bn, the year 2012 is off to a relatively humble start indicating that no major increase in the launch figures is expected.
The industry still seems unsettled by the global economic development and reacts accordingly in terms of the setup and launch of new vehicles. Due to declining growth rates in China (China's GDP-growth Q1 2012: 8.1% versus 8.9% in Q4 2011), Asia has not managed to escape the slow-down scenario occurring in Europe and the United States, as was partially the case in the years 2009, 2010 and 2011. Nevertheless, most Asian real estate markets continue to depict a positive investment environment although a cooling of the market is expected to manifest itself during the course of year 2012.
Clear trends for the year to date are still difficult to detect. The biggest concern remains the apparent lack of financing, particularly for value-added and opportunistic investment strategies. This affects all the more fund managers, as favorable financing conditions and terms would help achieve high returns with little effort. With the demise of bank lending and large real estate financing institutions, the pressure on real estate owners for financing and re-financing is likely to further increase creating additional funding gaps.
In terms of geographical allocation, North American funds dominate the industry landscape in this 1st quarter of 2012 with the launch of 33 new vehicles and a target equity of USD 12.2bn. This reflects in terms of the target equity, a market share of 44.8% and is a clear increase compared to the long-term average (2005-2011) market share of 36%. Market shares in Q1 2012 of Asia (15.7%) and Europe (29.2%) remained almost identical to their respective long-term average market shares of 15.5% and 29.5%.
The industry still seems unsettled by the global economic development and reacts accordingly in terms of the setup and launch of new vehicles. Due to declining growth rates in China (China's GDP-growth Q1 2012: 8.1% versus 8.9% in Q4 2011), Asia has not managed to escape the slow-down scenario occurring in Europe and the United States, as was partially the case in the years 2009, 2010 and 2011. Nevertheless, most Asian real estate markets continue to depict a positive investment environment although a cooling of the market is expected to manifest itself during the course of year 2012.
Clear trends for the year to date are still difficult to detect. The biggest concern remains the apparent lack of financing, particularly for value-added and opportunistic investment strategies. This affects all the more fund managers, as favorable financing conditions and terms would help achieve high returns with little effort. With the demise of bank lending and large real estate financing institutions, the pressure on real estate owners for financing and re-financing is likely to further increase creating additional funding gaps.
In terms of geographical allocation, North American funds dominate the industry landscape in this 1st quarter of 2012 with the launch of 33 new vehicles and a target equity of USD 12.2bn. This reflects in terms of the target equity, a market share of 44.8% and is a clear increase compared to the long-term average (2005-2011) market share of 36%. Market shares in Q1 2012 of Asia (15.7%) and Europe (29.2%) remained almost identical to their respective long-term average market shares of 15.5% and 29.5%.
