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Capital flows to US real estate set to double, says DTZ

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GLOBAL - Global investment capital targeting US real estate is set to double in 2011 as the outlook for the market completes a dramatic improvement over the past 12 months, according to DTZ.

DTZ Research estimates that $97bn (€67bn) of capital will be targeting the US in 2011 from a total global availability of $281bn.

In its annual report, The Great Wall of Money, DTZ said this was a 54% increase on its December 2009 estimate, the greatest increase for all the main real estate market regions.

Asia Pacific was also set to attract more capital in 2011 ($71bn), an increase of 29% on last year's estimate.

The majority of available capital ($112bn) will continue to target Europe, DTZ said - the growth in investor capital volume for the US and Asia has been made possible by a 22% increase in total available global capital.

Nigel Almond, associate director of forecasting and strategy at DTZ and author of the report, said: "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."

The DTZ report highlights the return of quoted and private property companies to the market, with publicly listed companies now accounting for 17% of available capital, compared with 4% reported in December 2009.

Capital from private property companies and individuals now accounts for 14% of available capital, rising from 3%.

Third-party managed funds, while still accounting for the majority of available capital, have decreased their share from 77% to 49%.

DTZ Research data suggests diversification by both geography and property type continues to be a priority for investors.

In line with the previous analysis, the majority of capital is due to be invested in multiple countries.

However, this share of capital has decreased from 70% to 56%, highlighting a growing focus on single-country investments.

Of those investing in single countries, there has been a significant increase in funds targeting the US, which now accounts for 51% of available single country focused capital.

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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