Great Wall of Money March 2011

10 March, 2011

  • US$104bn targeting Asia Pacific, a 45% increase from mid-2010. EMEA remains largely unchanged at US$114bn
  • Asia and European investors are focused on investing in their home countries or regions, while US-based investors are more likely to invest inter-regionally
  • Raised capital targeting most attractive regions, based on the DTZ Fair Value Index™
  • Re-pricing in some Asian markets may be faster than implied by fundamentals
  • Future new capital raising expected to stabilise, if property becomes less attractive

DTZ Research estimates that US$329bn of capital will be available to invest in global real estate in 2011, a 17% increase on DTZ’s previous estimate in mid- 2010. This increase is predominantly a result of a growing number of funds targeting Asia Pacific, with available capital up 45% to US$104bn from US$71bn available since the last report.

The latest ‘The Great Wall of Money’ report launched today, tracks new capital targeting direct real estate. In line with the two previous reports, third party managed funds account for the majority of available capital, with a 56% share of activity. These funds have already raised a total of US$131bn of capital compared to US$114bn reported six months ago. Publicly listed companies now represent 20% of raised capital reaching US$71bn, more than double the US$33bn previously available.

Single country investment now accounts for 50% of funds raised, compared to 30% in December 2009. The research also analyses the regional domicile of investors in each of the regions invested. Domestic or intra-regional investment dominates the picture, with little inter-regional investment focus.

Nigel Almond, Associate Director of Forecasting & Strategy at DTZ and author of the report comments: “The latest report findings show that many investors remain focused on their more familiar, home country or regional markets. This is particularly true in Asia Pacific and EMEA where 92% and 81% of capital targeting the region has been raised locally. America bucks the trend with only 36% of funds directed towards the Americas. We also see that the majority of funds continue to target multiple property types, highlighting the need for flexibility in deploying capital.”

Available capital for funds targeting Asia Pacific are up 45% to US$104bn from US$71bn. The report also highlights a further increase in the amount of capital targeting the Americas, which rose 14% to US$111bn from US$97bn. However, the amount of available capital targeting the EMEA region has remained relatively similar with a 2% increase to US$114bn. The volume of capital in the three core regions globally is now equally distributed, this is in marked contrast to December 2008 when nearly half of all available capital targeted EMEA.

The relative increase in the volume of capital targeting Asia Pacific and the Americas is consistent with the latest DTZ Fair Value Index™ (FVI), which shows that markets in these regions are generally more attractive. Of the capital targeting single countries, the US continues to attract over half the available capital. This is again consistent with the FVI analysis of the US as one of the most attractive global markets. The UK is the second most popular single country target, attracting 10% of available capital, a reduction from previous quarters. This is in part reflects the downwards trend in the UK’s recent FVI scores.

Hans Vrensen, Global Head of DTZ Research, comments: “The potential impact of the substantial increase in capital targeting Asia Pacific is that we expect to see greater competition for investment opportunities. As a consequence, re-pricing in some of the Asian markets may occur at a faster pace than implied by our fundamental analysis. This scenario has already been witnessed in the UK and is also starting in continental Europe.”

Despite the recent increases in available capital, looking forward, the amount of capital expected to be raised in the future will stabilise. Hans Vrensen, Global Head of DTZ Research, continues: “Since our first Great Wall of Money report in December 2009, we have seen strong growth in raised capital. We anticipate a stabilisation in new capital being raised in future, if there is a further continuation of the decline in the attractiveness of property, as indicated by the Fair Value score over the past four quarters.”

EMEA

Magali Marton, Head of DTZ CEMEA Research, said: “We estimate that the total amount of available investment capital in Europe in 2011 is US$114bn, which is virtually unchanged from our first analysis in December 2009. This correlates with the latest European DTZ Fair Value Index score of 40, which indicates a slight reduction in attractiveness. Pricing has adjusted across Europe, but particularly so in the UK. However, there are still some attractive buying opportunities especially within emerging European markets.”

Asia Pacific

David Green-Morgan, Head of DTZ Asia Pacific Research, said: “The significant increase in the amount of available capital targeting Asia Pacific, up 45% from mid- 2010 is in line with the latest Asia Pacific DTZ Fair Value Index score of 57, showing that on average this region offers more hot than cold markets. During the latter part of 2010, the growth in new raised capital from publicly listed companies has been particularly strong in Asia Pacific. Of the single country investment funds, China and Australia remain the most popular target countries in the region.”

 


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