Capital Will Be Bountiful This Year, U.S. CRE Leaders Say
A February survey of 142 senior leaders of U.S. commercial real estate investment management firms revealed a confident sentiment for capital fundraising in 2021.
The survey was conducted by Juniper Square, an investment management software company geared for CRE that had done another survey in fall 2020 showing a more subdued outlook. About 50% of the February 2021 survey participants were Juniper Square customers.
One of the most prominent findings of the February survey is that 94% of respondents plan to fundraise this year with the expectation that capital will be abundant. Questions in the 2020 survey differed, and so a direct comparison can’t be made. However, 64% of last year’s respondents said they had fundraised between March and August.
Another divergence is whereas 81% of 2021 respondents intend to primarily raise capital from new investors, a majority of survey participants in 2020 said they had raised from existing investors, according to Juniper Square Senior Vice President of Sales Brandon Sedloff.
“Folks are feeling generally more optimistic now than they were before about the prospects for private real estate investing,” Sedloff said. “I think that secondly, there's a lot more appetite from investors to want to commit capital to private real estate as well.”
With the coronavirus pandemic continuing to impede face-to-face interactions, this year will likely see a shift in how sponsors attract new capital and manage those investors once they are onboarded, Sedloff added.
One notable observation from the February survey was that a plurality of respondents indicated that the average capital commitment from their last fundraising effort was between $150K and $300K.
“We are seeing a shift toward the smaller check size — the retail investor,” Sedloff said. “That doesn't necessarily mean that people are investing less. What it means is that the distribution, the type of investor, is shifting. Where it used to be if that you're a large institutional manager, the only type of capital that you were able to target is very large check sizes.”
Sedloff cited the increased use of technology by investment managers as a reason for this shift. It reduces the cost of managing each investor position, creating a more flexible approach to the overall investment strategy, he said. The survey found that sponsors using fundraising tech platforms reported average capital commitments twice as large as those not using technology.