• Great wall of money targeting global real estate remains high, despite receding for the first time since 2011 due to less available debt
• More capital is targeting Americas than EMEA for first time on record, EMEA impacted by strong dollar
• Capacity constraints for quality assets are leading investors to new strategies including ‘build to core’
• CEE – a high-priority target for global capital
The amount of new capital available for global real estate investment in 2017 stands at $435bn – a small drop on last year’s peak but the second-highest figure recorded since 2009, according to research from Cushman & Wakefield.
The Great Wall of Money report series tracks the amount of newly-raised capital, including debt and equity, targeting real estate at a global level. The total global wall of money has fallen by 2% compared with 2016, the first drop since 2011. However, current levels are the second highest on record, reflecting the extraordinary rise in capital targeting the sector this cycle.
Capital targeting EMEA shrunk 9% in US dollar terms to $130bn, whilst the Americas grew 2% to $173bn and Asia posted a marginal increase to $132bn.
Increasingly investors are concentrating on single country strategies rather than deploying capital across multiple borders. Single country investments now represent 61% of available capital, up 55% over the last three years. Based on Cushman & Wakefield estimations, the US is likely to remain the most targeted investment market in 2017. Although investment activity slowed during 2016, the great wall of money targeting the market remains high, with many investors still under allocated to the sector with regards to investment intentions.
China is expected to remain the second most targeted country with a majority of capital committed from domestic funds. There are a number of overseas funds seeking a foothold in China as rapid economic development provides a growing investment base, including a number of US domiciled funds.
The UK is the third most attractive market, albeit Cushman & Wakefield expects relatively less capital to target the UK as some investors take a ‘wait and see’ approach against the uncertain political and economic backdrop of Brexit negotiations. That said, some investors are keenly waiting on the side lines for more product to come to market in the event of pricing weakness.
James Chapman, International Partner, CEE Capital Markets, said: “It is no great surprise to see CEE as a high-priority target for global capital. The occupational fundamentals are exceptionally strong and the economies are some of Europe’s leading lights. The investors achieving success in the region are those who have targeted strategies and the insight to find the compelling fundamentals in specific sub-markets. We expect CEE in 2017 to be characterised as a year for new micro-locations and sub-sectors opening-up to investors as value is found in following occupier trends.”
US trumps EMEA for most available equity
For the first time, more equity is available across the Americas ($79bn) than EMEA ($72bn). The wall of capital targeting the US has been building steadily as institutional investors have bumped up their allocations to the highest levels in history, and offshore investors swarm to park money in high-quality US assets. The fall in available equity across EMEA is largely a reflection of a strong dollar. With close to 80% of funds targeting Europe reporting in either euros or pounds, the currency context of reported volumes is a key component. Reflecting growing investor demand, Asia Pacific registered a strong 7% rise in available equity to $65bn.