Global capital for RE investing to increase 22 percent in 2011

According to its report, ‘The Great Wall of Money’, DTZ says the US is forecast to generate the largest increase in available capital, followed by Asia. However it says there will be a decrease in the amount coming from real estate funds and other ‘third party’ sources.

DTZ, the global property services firm, has predicted that there will be 22 percent more available capital for global real estate investments in 2011 than there was this year.

According to its latest ‘The Great Wall of Money’ report released this week, there will be $281 billion of capital for real estate investing next year thanks largely to increases in the US by 54 percent to $97 billion and 29 percent to $71 billion in Asia. The predictions reflect increases on DTZ’s previous predictions in December 2009.

Hans Vrensen, global head of DTZ Research, said the increases in available capital will result in increased transactions. He said: “With the current levels of capital targeting real estate markets, we anticipate an increase in global transaction volumes during 2011.  There have been significant changes in the targeting of this available capital over the past 9 months.  As a result, we expect US volumes to pick up more substantially than in Asia Pacific and Europe.”

The capital, DTZ reported, is to come from sources including increased numbers of publically listed companies and private companies – 17 percent and 14 percent compared to 4 percent and three percent respectively in December 2009.

The firm said, however, that available capital from third party managed funds – capital managed on behalf of others – had fallen considerably, from 77 percent of all capital to 49 percent. Despite that DTZ also said third party capital still represented the largest source.

DTZ also said that capital available for real estate is increasingly targeting single geographies over multiple countries. While capital targeting the latter still represents the majority with 56 percent of all capital, this was down from 70 percent in December last year. The US is to lead the way in terms of single countries expected to attract the most capital.

Nigel Almond, associate director of forecasting and strategy at DTZ and author of the report said: “The current attractiveness of the US is in stark contrast to the situation a year ago.  Most US markets were cold, offering expected returns below risk adjusted required returns. This opportunity remains largely unexploited to date, since transaction volumes in the US have not yet seen the levels witnessed in Europe and Asia Pacific.” 

The report also said there was $133 billion in real estate investments completed in the first half of this year, double the amount completed at the same point last year. Within that figure, investments in Asia tripled to $64 billion while investments in Europe increased 86 percent to $54 billion. The US, however has seen “flat” levels of transactions, DTZ recording just $15 billion in the same timeframe.