US-focused commercial real estate debt managers raised $26.83 billion for new funds in 2021, less than the roughly $28 billion allocated to debt funds in 2020, according to data from affiliate title PERE.
Debt strategies made up about 17 percent of all capital raised for commercial real estate last year, down from the 19 percent seen during the same period in 2020. Core-plus strategies, which made up 40 percent of all capital raised, were the most popular destination. And, at 32 percent, value-add funds were the second-most active strategy for investors.
Brookfield Real Estate Finance Fund VI was the largest fund raised in 2021, with Brookfield Asset Management raising $4 billion against a target of $3 billion. Torchlight Investors, Rialto Capital Management and a pair of funds managed by Berkshire Residential Investments rounded out the five largest debt-focused funds raised in 2021.
Fundraising for debt strategies, and for commercial real estate more broadly, is expected to stay strong this year. A 2022 outlook from Park Madison Partners notes that the sector is still gaining favor in institutional portfolios because it provides diversification, solid returns relative to other private assets and the potential for hedging against rising inflation. There is also the possibility for current income. The firm is expecting average institutional investor allocations to approach 11 percent in 2022.