Sluggish fundraising last year from U.S. pension funds for commercial real estate vehicles combined with a similarly weak 2023 to cap the weakest two-year fundraising period in more than a decade.
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Pension funds pledged $31.6B in commitments last year, down 3% year-over-year, bringing the two-year total to $64.3B, the lowest two-year volume since 2013 and below the record $65B that was raised in 2022 alone, according to a new report from Ferguson Partners.
Pledges began to tick up toward the end of the year, with fourth-quarter pledges totaling $7.4B, up from $7.1B the prior quarter.
“Things did improve at the margins through the course of 2024,” Ferguson Director Scott McIntosh told Green Street. “Looking a year from now, we see further momentum, with 80% of those we’ve surveyed recently expecting the availability of equity capital to be better at the end of 2025.”
The capital commitments made in 2024 continued to target high-yield strategies, but funds flowed more toward performing assets in 2024 compared to the prior year, according to the report.
Opportunistic and value-add funds secured 65% of the dollars committed last year, down from 76% the prior year but roughly in line with historical averages. The remaining capital flowed to core and core-plus investment vehicles.
Just more than half of pledged dollars were committed to specific asset types, a modest increase from 2023. Niche property funds, which include data centers, single-family rentals and life sciences properties, attracted the most interest.
Industrial funds attracted 26% of property-specific pledges, while multifamily vehicles drew 33% of pledges, retail funds secured 5% and office-focused vehicles locked in just 1% of pledged capital.
The average commitment in 2024 was $197M, down from $287M a year earlier. While pledge size decreased, the total number of commitments increased 7% in 2024 to 309.
Ferguson’s data is based on reporting from 312 U.S. public pension funds with more than $5.5T in total assets under management.
Investors piled into real estate during the pandemic, when funds were being raised specifically to target an expected wave of distressed assets that has failed to materialize.
In 2022, 13 funds raised a combined $4B to target distressed assets. In 2024, just two funds were created and raised a combined $240M, according to Preqin.
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