LONDON—Even as private equity real estate fundraising totals fell short of recent years, 2017's deal activity set a new high water mark globally, Preqin said Friday. The firm reported 5,191 deals for the year, totaling US$287 billion, a new record dollar amount surpassing the previous record-high established just a year earlier.

Not all regions experienced increases, though. While North America continues to account for the majority of deal activity, its share has declined since 2012 while Europe's has grown.

PE firms announced 3,489 North American transactions in '17 worth a total of US$155 billion, for slightly more than 67% of transactions and 54% of dollar volume. That compares to the region's 81% of transactions and 72% of dollar volume, respectively, in '12, although the total number of transactions globally was a little more than half as large in '12. It also represented a decline from 2016—mking North America the only region to experience a year-over-year drop.

Meanwhile, Europe saw record deal activity last year, with 1,459 deals worth a total of US$89 billion. This represents a 13% increase in the number of deals, and a 33% increase in deal value compared to '16.

Although Asia recorded just 77 deals in '17, similar to the previous year's level, aggregate deal value for the region doubled, reaching US$28 billion. The increase pushed the region to represent 10% of total value, while accounting for just 1% of deals globally. Asia's dollar total was boosted considerably by a single deal in Guangzhou, China, where Vanke acquired a portfolio of 16 land development sites from Guangdong International Trust and Investment for US$8.1 billion.

Despite sluggish deal activity in the beginning of the year, levels picked up in the year's second half, driving '17 to be “a banner year for the private equity real estate deal industry,” says Oliver Senchal, head of real estate products at Preqin. “Despite the number of transactions remaining relatively stable over the years and concerns surrounding pricing, the quarter of a trillion dollars available to fund managers has pushed investment volume to new highs.”

He notes that North America accounts for the largest part of the Y-O-Y slowdown in the number of deals, with the region seeing 207 fewer transactions compared to '16. “Although UK deal activity slowed in the immediate wake of the UK-EU referendum in '16, deal levels in Europe nonetheless bounced back, seeing record investment activity in '17,” Senchal says. “Furthermore, real estate activity in Europe centered around UK and German assets, which accounted for 28% and 29% of European transactions, respectively.”

Looking at the current fundraising environment, which sees a record number of funds in market even as many funds are reducing their targeted returns, Senchal says, “What remains—even in this environment—is strong investor appetite, backed up by a fund manager base that has generally delivered for them in recent years. Distributions have been high, target allocations need to be met and in a low interest rate environment real estate continues to satisfy the desire for diversification, reliable income streams and attractive absolute returns. Those fund managers that can express a unique value proposition and can mitigate investors' pricing concerns will likely be the recipients of capital commitments in 2018.”

Instant Insights /

PE Activity Falls in N. America, Rises in Europe

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