Institutional Real Estate Americas

December 2011: Vol. 23 No. 11

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From the Current Issue


New Commitments Remain Modest

The commercial real estate transaction market experienced a little more liquidity in 2011; however, new real estate commitments by plan sponsors remained restrained, partly due to the wall of previously committed capital yet to be invested and also due to the lack of distributions from existing investments. Through mid-November, Institutional Real Estate, Inc. (IREI) tracked approximately $6.9 billion of publicly announced capital commitments, an 8 percent increase from the 2010 total, and up 28 percent from the $5.4 billion recorded in 2009. By comparison, IREI tracked $17.6 billion of commitments to real estate during the market peak in 2007 and $15.5 billion in 2008.


Offerings Flood the Market Despite Limited Capital

While current economic conditions don’t help the fund-raising environment, the capital commitment overhang from previous years also has placed some investors in a holding pattern. And the large number of funds competing for limited capital makes for a long and bumpy road littered with fund-raising extensions and numerous failed efforts. However, despite a gloomy outlook for fund-raising in the months ahead, investment managers continue to roll out new products. Through the first nine months of the year, sponsors have rolled out more than 150 pooled investment vehicles. Collectively, these 2011 vintage funds were seeking to raise approximately $81 billion of equity capital.


Pedal to the Metal: Congress Needs to Accelerate Demand in Order to Revitalize the Economy

From the beginning of the recession during the fourth quarter of 2007 until the fourth quarter of 2009, U.S. gross domestic product (GDP) contracted at an average annual rate of 3.5 percent. Before the recession, GDP had been growing at an average annual rate of 2.6 percent. With the costs of two wars adding to federal expenditures, the taxes collected from this level of economic activity were too small to balance the pre-recession budget.

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