Capital for commercial RE grows by 4% in six months
10 Oct 2012
The amount of investment capital available internationally for real estate deals has grown by 4% over the last six months, on the back of a rise in new equity in Europe, a report shows. Asian and American investors have become more optimistic about leverage, and this has also driven the expansion of potential investment money, according to the latest 'Great Wall of Money' report from property adviser DTZ.
Available capital targeting direct commercial real estate in 2013 has grown by 4% to $311bn globally, from $298bn six months ago, DTZ said. This included increases in all regions except Asia Pacific, where the total fell by 4% to $80bn.
While available capital grew overall, the equity element has remained flat over the period at $139bn compared with the end of last year. But within this, at a regional level, available equity rose by 7% to $58bn in the EMEA. "The increase is a surprise given the continued uncertainty in the euro-zone," the company said.
"This increase reflects pent-up demand as legacy funds struggle to deploy capital as investment activity remains weak." Investment volumes were €50bn ($64.5bn) in the euro-zone in the first half of this year, lower than the longer-term average of €65bn, it said.
"The bid-ask spread between what opportunistic investors want to pay, and what banks are willing to accept for collateral sales remains wide, stalling the deployment of capital," it said.
This would probably narrow, DTZ predicted, as banks focused on their secondary portfolios and growing regulations forced further deleveraging.
Globally, property investors are now focusing more on single-country funds, with players preferring to stick with what they know best, the report found.
Single-country funds now account for 57% of available capital - the highest share since the report started in 2009.
Of single-country funds, the US still attracted the greatest share of capital at 46%, DTZ said, but it noted that this proportion had been falling steadily since its peak in 2010.
The preference for home markets and regions has increased, it says, reflecting investors' continued risk aversion.
At the moment, Asia Pacific is the main focus of regional capital, it said.
The report is based on a bottom-up analysis tracking the activity of more than 1,900 separate funds and other investors globally, DTZ said.
Author: Rachel Fixsen