Global realty investments put at $281bn in 2011

An estimated $281 billion of capital will be available to invest in global real estate in 2011, a 22 per cent increase from its previous estimate in December 2009, according to global real estate consultancy DTZ.

“The greatest increase in available capital is forecast to be focused on the US ($97bn), representing a significant 54 per cent increase on our December 2009 estimate,” DTZ said in its latest “The Great Wall of Money” report.
  This is in line with the DTZ Fair Value Index score of 89, which shows most markets in the US now offer an attractive opportunity to investors. A further $71bn is targeting the Asia Pacific region, an increase of 29 per cent. While the majority of available capital continues to target Europe ($112bn), this is unchanged from our December 2009 estimate.

Nigel Almond, Associate Director of Forecasting & Strategy at DTZ and author of the report comments: “The current attractiveness of the US is in stark contrast to the situation a year ago.  Most US markets were cold, offering expected returns below risk adjusted required returns. This opportunity remains largely unexploited to date, since transaction volumes in the US have not yet seen the levels witnessed in Europe and Asia Pacific.”

DTZ said return of quoted and private property companies to the market with publicly listed companies now comprising 17 per cent of available capital, compared to four per cent reported in December 2009. 
Capital from private property companies and individuals now accounts for 14 per cent of available capital, rising from 3 per cent previously. Third party managed funds, while still accounting for the majority of available capital, have decreased their share from 77 per cent to 49 per cent.

The research also reveals that both Asia Pacific and Europe will continue to be targeted with a higher share of capital, compared to the amount that has been raised in these regions. This suggests an increase in cross-border investment in 2011.  The recovery of cross-border investment flows would be from a low base given the significant retrenchment in recent years.

During the first half of 2010 global investment volumes increased substantially to $133bn, double its level in the same period of 2009.  Growth in Asia Pacific tripled, rising to $64bn compared to the same period last year.  European investment activity totalled $54bn representing a 86 per cent increase.  The US however, has yet to see an increase in transactions with volumes remaining flat at $15bn in the same period.

Hans Vrensen, Global Head of DTZ Research, said: “With the current levels of capital targeting real estate markets, we anticipate an increase in global transaction volumes during 2011.  There have been significant changes in the targeting of this available capital over the past nine months.  As a result, we expect US volumes to pick up more substantially than in Asia Pacific and Europe.”

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