The amount of global money chasing commercial real estate has fallen by 6% in six months as debt continues to tighten.
According to DTZ’s new Great Wall of Money report, there is now $298bn (£188.4bn) of capital for investment into property as the amount of debt available to funds fell by 12%, offsetting a 4% increase in equity capital in the six months from mid-2011 to the end of the year.
The total also dropped as existing funds made investments that ate into their cash piles.
The biggest fall was recorded in Asia Pacific, where new capital fell 9% to $83bn.
Available capital in the Americas fell 5% to $108bn, just ahead of EMEA on $107bn. The relatively small drop of 3% in Europe reflected the difficulty funds were having in deploying capital against continued uncertainty as the sovereign debt crisis persisted.
DTZ said the reduction in the amount of capital for investment in 2012 reflected a more realistic view on the amount of debt funds can obtain, and at what price.
However, in a reversal of recent trends the agent reported a significant increase in the raising of new funds.
It tracked funds seeking to raise up to $53bn in fresh cash to deploy into commercial real estate in 2012 – a significant increase on the $30bn recorded six months ago.
It said that of the funds being raised, those focusing on investing in a single country remained the most popular comprising more than 61% of vehicles.
Of the single-country funds, the US continued to attract the greatest share of capital at 48%; however, a new focus on Asia was emerging, the agent reported.
The report found that a quarter of funds that have announced their intent to raise capital or are in the process of raising capital were targeting China, which continues to grow and has maintained a stable economy in the face of global turmoil.
While some investment managers were raising fresh cash, others were racing against the clock to invest capital raised before 2009 as investment periods draw to a close.
DTZ found that this is especially relevant as managers would seek to deploy this capital rather than return the investors’ commitments and endanger their core fee income.
It also said that 55% of available capital at risk was with opportunity funds, although bank loan portfolio sales this year would provide these vehicles with attractive deals this year.
bridget.oconnell@estatesgazette.com
