Return to search

EXPO REAL: $311bn available for investment in 2013

DTZ’s 'The Great Wall of Money' report says the volume of available capital for 2013 has increased by 4 percent over the last six months. The rise has been driven by an increase in new equity in Europe and increased optimism in the US and Asia for real estate financing.

There is $311 billion of capital available for real estate investment globally in 2013 – a rise of 4 percent on the amount available six months ago.

DTZ, the property services firm, revealed the figure in its “Great Wall of Money” report, which suggested the increase in capital available was driven by rise in new equity in Europe, up by 7 percent to $58 billion, while Asian and American investors were more optimistic about leverage.

The increase in the EMEA region was a surprise, said DTZ, given the continued uncertainty in the Eurozone.

However, it added: “This increase reflects pent-up demand as legacy funds struggle to deploy capital as investment activity remains weak.”

It continued: “The bid-ask spread between what opportunistic investors want to pay, and what banks are willing to accept for collateral sales remains wide, stalling the deployment of capital. As banks focus on their secondary portfolios and growing regulations forces further deleveraging we expect this to narrow.”

In contrast, available equity fell 8 percent in Asia Pacific to $35 billion. Despite some cooling in activity in the region, liquidity levels remain high and investment volumes totalled close to $55 billion against an average of $37 billion since 2003. Higher levels of liquidity means funds are able to deploy capital more easily relative to other regions, though funds in Asia Pacific are having mixed success in deploying capital. In the Americas available equity remained flat, added DTZ.

The figures in the Great Wall of Money report are based on a number of factors and assumptions.

There has been $429 billion of capital raised that is for deployment over the next three years. That figure includes capital raised by 2,000 funds. DTZ then assumed an average loan to value for investments of 56 percent, although it assumed zero leverage for sovereign wealth funds, giving a total capital raised of $966 billion.

Next, DTZ said some $189 billion of that overall $966 billion was expected to be withdrawn reflecting the fact that some fund managers have not been able to invest all committed funds. It then calculates that another $154 billion will be raised in the next few years.

Finally, the capital is expected to be invested over a three year period, so DTZ said roughly one third – $311 billion – would be invested in 2013.

As well as that figure, DTZ said it saw a greater focus on single country funds, representing 57 percent of available capital. “Investors are focussed on markets they know best and where they are able to deploy capital more easily,” said the report.

Preference towards investing in home markets and regions reflected the continued uncertainty and risk aversion among investors.

Meanwhile, Asia Pacific was the main focus of inter-regional capital at present. “This is not surprising as economies in Asia Pacific are in better shape, while real estate markets remain attractively priced,” it said.

Lastly, DTZ said it saw an increase in funds moving “up the risk curve” reflecting the lack of core product in the market. “This could place greater pressure on legacy funds targeting to deploy capital towards opportunistic assets as their investment periods start to run out,” it said.