Institutional capital will continue to flow into the asset class at a rate similar to the past year, Moylan adds, “but with a record number of managers seeking investor commitments and the largest players becoming increasingly dominant, fundraising is going to remain extremely challenging for most. Those looking to buy real estate in 2017 will continue to face a crowded marketplace, with challenging pricing as a result. Fund managers did invest large levels of capital in 2016, and while some are having to look further afield to find the best deals, most expect to be even more active” this year.

Separately, a new Preqin survey of institutional investors finds that 36% compared to invest more in real estate over the long term, compared to 10% that plan to decrease their allocations. However, for this year the balance is nearly even between investors who plan to allocate more and those who expect to allocate less.

StepStone Group oversees approximately $100 billion of private capital allocations worldwide, including $28 billion of assets under management. It entered the real estate space in 2014 with its acquisition of Clairvue Capital Partners.

NEW YORK CITY—StepStone Real Estate on Wednesday said it had closed its latest fund at $700 million, exceeding its $500-million target. The New York City-based private equity group launched StepStone Real Estate Partners III, which is geared primarily toward secondary investments, in August 2015. Including committed co-investment capital, StepStone will have over $1.1 billion to execute SREP III's strategy of investing in special situations in the US and Europe.

With SREP III, StepStone Real Estate intends to continue its strategy of providing “bespoke capital solutions to managers and operators of institutional real estate portfolios to help them capitalize on new opportunities, generate liquidity for investors, or address capital requirements in their existing holdings,” says Jeffrey Giller, San Francisco-based partner and head of real estate at Stepstone Group. He adds that the latest fund's investor base consists of pension funds, foundations, insurance companies, funds of funds, family offices and high net worth individuals from the US, Europe, Asia, Middle East and Latin America.

To date, SREP III has completed eight investments and is about 30% committed, says partner Josh Cleveland, who oversees the group's activities in Europe. He says Stepstone Real Estate's “creative and flexible approach to working with institutional quality real estate investment managers” is expected to continue driving significant opportunities for the fund over its investment period.

A global outlook report from Preqin issued earlier this month sees continued activity in the sector among both fund managers and investors. “In a low-return environment, investors will continue to look to real estate as a key part of their portfolio for diversification, reliable income generation and attractive returns, even if performance in the coming years may not be as strong as the past few,” says Andrew Moylan, the firm's head of real assets products.

Institutional capital will continue to flow into the asset class at a rate similar to the past year, Moylan adds, “but with a record number of managers seeking investor commitments and the largest players becoming increasingly dominant, fundraising is going to remain extremely challenging for most. Those looking to buy real estate in 2017 will continue to face a crowded marketplace, with challenging pricing as a result. Fund managers did invest large levels of capital in 2016, and while some are having to look further afield to find the best deals, most expect to be even more active” this year.

Separately, a new Preqin survey of institutional investors finds that 36% compared to invest more in real estate over the long term, compared to 10% that plan to decrease their allocations. However, for this year the balance is nearly even between investors who plan to allocate more and those who expect to allocate less.

StepStone Group oversees approximately $100 billion of private capital allocations worldwide, including $28 billion of assets under management. It entered the real estate space in 2014 with its acquisition of Clairvue Capital Partners.