Despite the largest real estate fund in history closing at $30B last year, 2023 overall proved to be a bleak year for capital raises.
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Private equity and nontraded REITs reported their lowest investment capital haul in 11 and five years, respectively, according to CoStar.
On the private equity side of the token, PERE reports $139B was raised in 2023, a far cry from a peak in 2021 of $236B across 554 funds. This marks its lowest year since 2012 when only $122B was raised across 485 funds.
And without money, deals fall off. Commercial property acquisitions made by private equity firms dropped from $87B in 2022 to $21B in 2023, CoStar reports. That was largely because of a combination of declining commercial property values and occupancy rates, as well as costly acquisition and operating costs due to interest rate hikes.
For nontraded REITs, the fundraising decline wasn't as sharp — $10B was raised in 2023 as opposed to $33B in 2022. But that is the lowest it has been since the $3.8B total in 2018, per Robert A. Stranger & Co.
Nontraded REIT stockholders offloaded their shares, leading to less available capital for acquisitions. According to CoStar, 11 nontraded REITs' portfolios shrank by $12.4B last year after growing by $49.2B in 2022.
Nontraded REITS are expected to pay $20B in redemption requests in 2023, twice as much as 2022’s total and the largest annual redemption payout in history. After limiting redemptions in late 2022 and early 2023, the percentage of requests that nontraded REITs fulfilled increased steadily throughout the year as asks decreased. Blackstone REIT fulfilled $1.1B of the $1.3B in requests it received in January, or 88%.
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