The amount of capital available for global real estate investment next year has dropped by 4% to $316bn (£202bn) as uncertainty ends a period of growth.
According to DTZ’s latest The Great Wall of Money report, funds are becoming more focused on putting existing commitments to work as the global market environment for raising equity has become less favourable, leading to the $13bn decline.
This ends a period of global growth which has been ongoing since the end of 2009, with only the Americas recording an increase in new capital, up 3% to $114bn.
In contrast, there has been a drop in new available capital in both EMEA which is down 3% to $111bn and Asia Pacific which is down 12% to $91bn.
The report, which tracks new capital targeting direct real estate and the opportunities this capital is targeting, also found that the majority of investors still prefer to focus on multiple property types, accounting for 80% of available capital.
DTZ said this suggests investors have a preference for flexibility to deploy capital across different property types.
Of funds targeting a single sector, retail remains the favourite target, comprising 35% of single-property-type funds, with industrial the second most favoured sector.
For the first time, single-country funds are the dominant focus, accounting for 52% of funds raised – up from 30% in 2009.
The agent said that it is also reflective of sentiment post-crisis, where people prefer to invest in a particular market they know. Of funds targeting single countries, the US dominates the picture, accounting for 51%, followed by the UK at 10%.
Looking forward, DTZ expects that the capital raised has the potential to lead to higher levels of cross-border activity in all regions, compared with recent transactional activity.
In Europe, cross-border investment has the potential to reach 75%, compared to one-third of activity in the past 18 months. In Asia Pacific, cross-border investment could reach two-thirds against 11% in the past 18 months. But, given the recent uncertainty in global markets, DTZ expects levels of cross-border activity to be more modest.
Hans Vrensen, global head of research at DTZ, said: “Despite the relative attractiveness of property compared to other assets, the current economic uncertainties are likely to impact on new capital raising for some time to come. We are likely to see a decrease in capital available if these uncertainties persist, as listed companies may delay new equity raising or IPOs and third-party funds are less able to attract new investments. In addition, much of the available capital was raised before 2008 so fund managers will be under increasing pressure to put existing capital commitments to work as some fund investment periods near their close.”
bridget.o’connell@estatesgazette.com
