Global investors are set to take on more debt as they pour $400bn (£268bn) into real estate in the next five years, according to a major report by Colliers International.
The agent’s Global Investor Outlook for 2016 found that more than half of institutions managing multi-asset portfolios planned to increase their allocations to property.
Major institutions such as Japan’s $65bn Government Pension Investment Fund are expected to move into real estate next year, joining the ongoing wave of Chinese pension money flowing into the UK and helping to drive yields down further.
Yield compression in prime markets is in turn expected to increase the appetite for debt from IRR-driven investors.
Respondents to the survey indicated a reduced demand for risk, but Colliers predicted that debt would play a greater role as more investors sought to boost cash-on-cash returns.
Three-quarters of UK-based investors said they would use debt compared with 65% in 2013. In the US 87% said they would use debt, up from 63% previously.
