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More funds targeting Asia Pacific Real Estate markets

Based on our updated analysis we estimate there to be US$329bn of capital available for investment in the direct real estate markets in 2011. This represents a 17% increase on the US$281bn we estimated to be available in mid-2010 and 44% greater than the US$229bn at year-end 2009 .

Boris Sullivan

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Insight The Great Wall of Money March 2011

According to DTZ latest study, US$329bn of capital is available for investment in the direct real estate markets in 2011. This is a 17% increase on the US$281bn reported mid-2010. Much of the growth reflects an increase in funds targeting Asia Pacific, up 45% to US$104bn (Figure 1).

  • The growth in newly available capital has been driven by third party fund managers and publicly listed companies. Also, the majority of funds continue to target multiple property types.
  • The target geography is now evenly split between single country and multi country funds. Asian and European investors have a preference towards investing in their home region.

Based on these findings we come to the following outlook:

  1. With more capital targeting Asia Pacific markets, we highlight the risk that some of these markets may re-price more quickly than suggested by our fundamental analysis.
  2. If the attractiveness of global property continues its decline of the last four quarters, we project a stabilisation in the amount of new capital available in the next few years.
  3. A raft of new regulatory initiatives could limit the availability of both new equity and debt capital in the longer term. Investors are already expecting these regulations

Significant increase in capital targeting Asia Pacific

Based on our updated analysis we estimate there to be US$329bn of capital available for investment in the direct real estate markets in 2011. This represents a 17% increase on the US$281bn we estimated to be available in mid-2010 and 44% greater than the US$229bn at year-end 2009 .

Insight The Great Wall of Money March 2011

In terms of current allocations by region, fewer than 20% of investors focus their activities outside their home region.

Much of the growth in available capital reflects a growing number of funds targeting the Asia Pacific region. In total we estimate this to represent US$104bn, a 45% increase on the $71bn available at mid-2010.We have also seen a further increase in the amount of capital targeting the Americas, which rose 14% to US$111bn. In contrast the amount of available capital targeting the EMEA region rose just 2% to US$114bn. Since the end of 2009, the amount of available capital targeting EMEA has remained virtually unchanged.

New capital targets most attractive regions

The impact of increased capital targeting Asia Pacific and the Americas now means the volume of capital targeting the three core regions globally is now virtually equally distributed. EMEA (Europe, the Middle East and Africa) still attracts the largest share of capital (35%), only marginally ahead of the Americas (34%) and Asia Pacific (32%). This compares with our first report, when close to half the capital targeted EMEA.The increase in capital targeting Asia Pacific and the Americas is consistent with the latest DTZ Fair Value Index™. This reflects the focus of investment on more attractive markets. Europe’s index score has remained below 50 in the past two quarters, indicating that a higher proportion of markets are COLD. In contrast the index scores for Asia Pacific and the US have been above 50 indicating a higher proportion of HOT markets.With more capital now targeting Asia Pacific markets we would expect some of these markets to re-price more quickly than suggested by our fundamental analysis. We have already seen this in the UK and it is also starting to happen in continental Europe. Read More: http://www.dtz.com/Global/Research/Great+Wall+of+Money+March+2011

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