22pc jump seen in global capital for property
Dubai, October 28, 2010
A total of $281 billion of capital will be available to invest in global real estate in 2011, a 22 per cent increase on a previous estimate in December 2009, said a report.
The latest ‘The Great Wall of Money’ report by DTZ Research, part of global real estate services firm DTZ, analyses the capital being raised by an extensive range of investor groups.
The greatest increase in available capital is forecast to be focused on the US ($97 billion) representing a significant 54 per cent increase on DTZ’s December 2009 estimate.
A further $71 billion is targeting the Asia Pacific region, an increase of 29 per cent, the report said. Whilst the majority of available capital continues to target Europe ($112 billion), this is unchanged from our December 2009 estimate.
“The current attractiveness of the US is in stark contrast to the situation a year ago. Most US markets were cold, offering expected returns below risk adjusted required returns,” said Nigel Almond, associate director of forecasting & strategy at DTZ and author of the report.
“This opportunity remains largely unexploited to date, since transaction volumes in the US have not yet seen the levels witnessed in Europe and Asia Pacific,” he added.
The DTZ report highlights the return of quoted and private property companies to the market with publicly listed companies now comprising 17 per cent of available capital, compared to 4 per cent reported in December 2009.
Capital from private property companies and individuals now accounts for 14 per cent of available capital, rising from 3 per cent previously. Third party managed funds, whilst still accounting for the majority of available capital, have decreased their share from 77 per cent to 49 per cent.
The research also reveals that both Asia Pacific and Europe will continue to be targeted with a higher share of capital, compared to the amount that has been raised in these regions. This suggests an increase in cross-border investment in 2011, the report said.
The recovery of cross-border investment flows would be from a low base given the significant retrenchment in recent years, according to the report.
During the first half of 2010 global investment volumes increased substantially to $133 billion, double its level in the same period of 2009. Growth in Asia Pacific tripled, rising to $64 billion compared to the same period last year. European investment activity totalled $54 billion representing an 86 per cent increase.
The US however, has yet to see an increase in transactions with volumes remaining flat at $15 billion in the same period, the report said.
“With the current levels of capital targeting real estate markets, we anticipate an increase in global transaction volumes during 2011,” said Hans Vrensen, global head of DTZ Research.
“There have been significant changes in the targeting of this available capital over the past nine months. As a result, we expect US volumes to pick up more substantially than in Asia Pacific and Europe,” he added. – TradeArabia News Service