1998 is likely to be the year that US investors become significant players in European real estate. After a decade of tentative interest, US funds are now committing some real money to the sector.

Two corporate deals in recent weeks highlight how attractive the UK has become to US-based investors, with Cendant paying £800m ($1.3bn) for National Parking Corporation and the private Wall Street investment bank Blackstone paying £520m for the Savoy Group. Both deals are significant because they have an important real estate angle: Cendant is already reportedly looking at developing hotels on as many as 20 of NPC's city centre sites. The Chicago-based broker Mark Robbins of Mes-irow Stein estimates that as much as $6bn of US money could be targeted at European real estate over the next two years. US values have been bid up to a level where we are seeing a new wave of speculative development, and with Asia in turmoil then you have to consider Eur-ope," he says.

On the institutional front, the California Public Employees' Retirement System (CalPERS) - the US's largest public pension fund - has committed $100m to a new European real estate fund run by Security Capital. CalPERS manages more than $129bn in assets including $5.8bn of real estate. The fund is choosing to enter Europe through Security Capital Global Realty, a Luxembourg-based property company being formed by Security Capital Group, which will invest in public and private real estate operating companies located in Europe, Asia-Pacific and Latin America. "A global real estate portfolio offers CalPERS greater diversification and the ability to capture higher investment returns abroad,'' says Charles Valdes, chair of CalPERS investment committee. "International real estate markets are experiencing dramatic growth and recovery. Global Realty offers us the ability to participate in another basket of investable opportunities that exist in foreign real estate markets.'' The fund will operate by taking strategic stakes in local property companies, and it made its first purchase in March when it bought a 50% stake in the UK's City & West End Properties. City & West End celebrated by snapping up a newly-completed office development at 7 Clifford Street in London's Mayfair for £28.8m. The property will serve partly as the headquarters for Security Capital Global Realty, and partly as an investment.

Global Realty is not the only option for US funds looking for exposure to European property: UBS subsidiary North Star Capital Partners has launched a $500m fund to focus primarily on the UK, and CS First Boston's Paradium fund and Goldman Sachs' Whitehall fund are all increasing there exposure this side of the At-lantic.

But other big American funds are taking the direct route into European property. The $200bn Teachers Insurance Annuity Association has been steadily amassing a European portfolio, beginning with the UK, and it is reported to have already placed $160m in the UK alone. According to Andrew Thornton of the fund's European adviser, Parkes & Co, Teachers considered but rejected indirect investment. "They have sizeable direct property holdings in the US," he says. "They are comfortable with direct real estate."

But to begin with Teachers co-invested along side experienced local players, such as Rodamco. Now, having gained confidence, Teachers is investing directly in its own right. For instance, in April it spent £27.5m on Widewater Place, Harefield, west of London. The 115,000 sq ft (10,600 sq m) office building reflects a net initial yield of 7.25%. Thornton says that Teachers is also looking outsidethe UK. Last year it announced that it had earmarked Ffr250m-500m for direct property investment in France. It has targeted Parisian offices, and shopping centres throughout France. The Paris office of LaSalle Partners - the Chicago-based investment adviser - has been retained to represent Teachers in its search for suitable investments Thornton emphasises that Teachers is in Europe for the long term. "When you're a $200bn fund a meaningful portfolio takes some building," he says.

Other entrepreneurial, US investors now see potential in Europe. For instance the developer Tishman Speyer has paid a rumoured £43m for a prime development site next to London's Paddington station. And in addition to its Savoy Group acquisition, Blackstone paid £92m for Arundel Great Court, the London headquarters of the accountants Arthur Andersen which is due to be vacated over the next three years.

With the UK's property cycle running at least a year ahead of its counterparts on the European mainland, industry observers expect the American investors' next move to be across the English Channel. Already some have made the move, with Cargill building up a portfolio of French industrial properties."