DTZ: RE investment to hit record $429bn in 2015

Despite a record amount of money targeting commercial real estate globally, a depreciating euro against the dollar meant the EMEA region actually registered a drop in available real estate investment capital, said a report from DTZ.

Capital targeting commercial real estate grew by 5 percent to reach a record $429 billion, according to a DTZ report. The property services firm said that with target gearing remaining flat at 55 percent, the growth in capital was being driven by increased equity.

The firm’s Great Wall of Money report shows that the increase was driven by greater capital targeting the Americas – up by 12 percent to $166 billion. Asia Pacific recorded a 4 percent increase in capital to $122 billion. In contrast, EMEA registered a 1 percent fall in capital to $141 billion.

“The drop in capital targeting EMEA reflects the strength of the dollar against the Euro,” Nigel Almond, head of capital markets research at DTZ, commented.

“In Euro equivalents, available capital rose 12 percent over the past six months from €111 billion to €124 billion, but a 12 percent fall in the Euro wiped out these gains. However with two thirds of capital raised within the region, currency fluctuation is unlikely to have any impact on available capital raised in Euros. With much of the other third raised in dollars, investors will be able to make their capital go further compared to six months ago.”

Non-listed funds continued to dominate capital raising, accounting for 60 percent of available capital, but listed companies have continued to increase their share to nearly a quarter of all capital raised.

Yet, this buoyant capital raising environment will not last forever as bond yields are expected to rise and the relative attractiveness of commercial real estate is expected to diminish, especially across Europe and the US, DTZ forecasted.

“The expectation of diminishing value and strong growth in capital means funds are rushing to an early close. Our analysis shows completed raising grew 13 percent, whilst the level of capital in the process of raising has begun to fall,” said Almond.