The amount of capital targeting real estate has fallen for the first time since 2011, according to Cushman & Wakefield’s latest Great Wall of Money report.
Total debt and equity targeting direct real estate fell by 2% this year to $435bn (£358bn), largely as a result of fewer fund managers targeting EMEA.
Allocations to EMEA shrunk by 9% to $130bn while capital targeting the Americas grew by 2% and capital targeting Asia stayed flat.
Where are investors putting their money in 2017?
Source: Cushman & Wakefield Research
For the first time, Cushman & Wakefield reported more equity available in the Americas, $79bn, than in EMEA at $72bn. The firm said institutional investors were more interested in channelling their capital into US assets as protection against inflation, as Donald Trump’s election as president coincided with a reflationary economy.
Debt levels down globally
Source: Cushman & Wakefield Research
The amount of debt available has fallen across the globe alongside a slowdown in investment transaction volumes and a fall in average loan-to-value ratios. EMEA is still the most conservative region, with LTVs falling from 48% to 44%. Part of this could be owing to the increased caution toward real estate from traditional banks, which still play a substantial role in the lending market. In contrast, US alternative lenders, which can take on riskier deals, have a stronger foothold in real estate finance.
Funds are raising less money – unless they are global giants
AVAILABLE EQUITY FOR INVESTMENT BY YEAR AND TARGET REGION
Source: Cushman & Wakefield Research
Rising competition and less available property has meant funds have slowed down their equity raising by 19%. Instead, they are focused on deploying existing capital. There are exceptions, the report said, including Blackstone, which is targeting a second $5bn pan-Asia fund, and Morgan Stanley, which is looking for €2bn (£1.8bn) in equity for a new global fund.
Low levels of core assets mean opportunistic and value-add funds are dominating the market
Available capital by fund style and target region
Source: Cushman & Wakefield Research
Unlisted funds are still the most popular type of fund, but listed companies are gaining traction
Investor profile
Source: Cushman & Wakefield Research
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