Sovereign Wealth Funds are expected to invest as much as $725bn (£390bn) in global commercial property markets in the next seven years, says a report from CB Richard Ellis.
CBRE Chief global economist Ray Torto said he expected SWFs to increase their weighting of commercial property to about 7% of total assets.
With nearly $4trn (£2.1trn) of total assets, a 7% allocation would mean SWFs own $280bn (£150bn) of commercial real estate.
“To put this into context, the entire US institutional-grade property portfolio owned or managed by investment managers and plan sponsors is valued at approximately $330bn (£177bn) today,” Torto said.
“Looking to the longer term, the SWF’s potential for future property investment is even more significant.
“It has been estimated that the SWFs could reach total assets of $12trn (£6.4trn) by 2015.
“A 7% allocation implies SWFs would make approximately $725bn (£390bn) of net property investments over the next seven years.”
Torto said to achieve their target allocations, SWFs will have to diversify future investment across countries, sectors and investment vehicles.
So far, their property investments have been largely concentrated in the US and Middle East.
Favoured future destinations will include the UK, Japan and other countries with currencies not held in the SWF’s foreign reserves.
EGi News 25/09/08
