Ever more capital is being allocated to real estate as investors increasingly target opportunistic and value-add plays, meaning that global capital aiming to enter the market could hit $2.5tn (£1.9tn) next year, according to Colliers International.
The advisory firm said that allocations to real estate from global institutions will reach at least $840bn this year, adding to the $370bn in closed-ended funds waiting to be deployed from last year. Combined with a “growing influence of sovereign and family wealth” the total is set to double, based on a 10.4% allocation to real estate.
According to the Colliers, global real estate assets under management doubled over the latter half of the investment cycle from 2014, with the top 100 global fund managers increasing REAUM from $1.6tn to $3tn.
Of the additional 298 real estate funds closed last year, combined with existing dry powder, the majority of cash raised is aimed at opportunistic and value-added plays.
Richard Divall, EMEA head of cross-border capital markets at Colliers International, said: “Despite economic growth cooling and a subsequent slowdown in investment activity, global real estate assets under management continue to rise and real estate allocations are up.
“There is a more cautious approach to investment as a result of Brexit uncertainty and increasing tensions between China and the US, but new sources of global capital continue to emerge despite consolidation among the larger real estate fund managers.
“The source of active global capital remains in the hands of institutions and private equity, but there are signs of a shift in spending power over the next five years as family offices, sovereign wealth funds and foundations increase their interest in the sector.”
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