Property appreciation and a swell of commitments to real estate that came in faster than managers could spend the capital helped to buoy managers' worldwide real estate assets under management, which rose 11.5% to $1.48 trillion in the year ended June 30.
The increase in worldwide AUM surpassed the 8.7% growth of the prior 12-month period, according to Pensions & Investments' annual survey of real estate managers.
Most categories of worldwide assets rose for the most recent period.
Worldwide AUM in hybrid debt exhibited the most growth, increasing 48.2% to $13.3 billion, after slipping 7.3% in the year-earlier period. Timber and agriculture assets continued a positive swing, with timber up 10.7% to $35.2 billion and farmland up 2.8% to $19.2 billion.
Worldwide assets managed in real estate investment trusts rose to $481.2 billion, up 15.6% from a year ago.
Total real estate assets managed for U.S. institutional tax-exempt clients grew 12.3% to $594.9 billion.
While market appreciation and total returns pushed up the assets under management, real estate managers for the past several years have been calling less capital to invest than they have been returning to investors in distributions, said Peter Rogers, Chicago-based senior investment consultant in the manager research group of general investment consultant Willis Towers Watson PLC.
Investment managers are trying to be more selective and cautious in what they buy, he said. They are attempting to find the right deals as increased competition has driven up prices, Mr. Rogers added.
Among the top 10 managers of worldwide real estate assets, Nuveen LLC, ranked first with $114.4 billion, up 15%; MetLife Investment Management was second, with assets of $113.1 billion, up 7%; and PGIM, the asset management arm of Prudential Financial Inc., was third with assets of $106.5 billion, up 2%.
Aviva Investors, which was on P&I's top 10 list last year, did not respond to the most recent survey. Aviva ranked eighth last year among the top 10 managers of worldwide real estate assets, with $44.6 billion in AUM. In May, LaSalle Investment Management agreed to acquire Aviva's $7 billion multimanager real estate business and Aviva's stake in real estate fund Encore+, which the two firms co-own.
Among the managers' U.S. institutional tax-exempt AUM, most sectors tracked by P&I rose in the most recent survey period.
U.S. institutional tax-exempt real estate equity assets were up 12.6% to $469.2 billion, continuing the sector's steady growth since 2010. Loans managed for U.S. institutional tax-exempt clients had the most growth, albeit from a small base, up 66.2% to $2.8 billion.
Other credit strategies had strong growth as well. Hybrid debt was up 30% to $7.4 billion, mezzanine was up 29% to just less than $8 billion and mortgages were up 9.8% to $71.9 billion.
Strong debt increases are "largely reflective of an ongoing trend we've seen since 2015 ... that we are seeing across the private debt spectrum," Mr. Rogers said.
With historic low levels of cap rates (a measure of expected real estate returns), and a long-in-the tooth real estate cycle, investors think debt strategies are more likely to offer enticing risk-adjusted returns than equity strategies, he said.
For the year ended June 30, the National Council of Real Estate Investment Fiduciaries Property index returned 7.2%, up from the 6.97% return for the 12 months ended June 30, 2017. The return from the income component of the index was 4.6%, with the appreciation component adding 2.5%.