The growth in new capital available for real estate investment continues despite a challenging environment for raising funds, according to a report previewed at the MIPIM property show in Cannes, France today.
London-listed property services firm DTZ released a preview of its forthcoming Great Wall of Money report, estimating $320 billion of new capital available for investment in 2013. This marks a 3 percent increase from the $311 billion reported six months ago.
The Americas experienced the biggest increase, as available capital grew 8 percent to $124 billion. Meanwhile, Asia Pacific has seen a 3 percent increase in capital targeting the region, which now totals $82 billion. In fact, DTZ’s research shows an increase in available capital across all regions except Europe, the Middle East and Africa (EMEA), which saw a marginal 1 percent fall in available capital from $115 billion to $114 billion.
Nigel Almond, head of strategy research at DTZ, said the decline in capital targeting the EMEA region “reflects a reduction in the target gearing ratio, as the availability of debt remains restrictive. In aggregate, the target gearing ratio in the region fell to 46 percent from 50 percent six months ago.”
The reduction in target gearing was evidenced across all regions. Gearing dipped to 56 percent from 60 percent in the Americas and to 51 percent from 56 percent in Asia. However, both Asia and the Americas saw greater increases in equity targeting their region, up 15 percent to $40 billion and 19 percent to $55 billion, respectively.
Over the last six months, the amount of new capital being raised has slumped by more than 30 percent to $34 billion. This reflects the difficulties funds have encountered in successfully raising capital over the last 12 months, with a number of funds taking longer to reach their fundraising targets. As a result, the growth in new funds has slowed across all regions. At the same time, the overall amount of raised capital has grown, up 10 percent to $286 billion in the same period, as some funds reach an early close.
Among funds, single-country vehicles continue to dominate, reflecting 53 percent of raised capital. Of such single-country funds, 43 percent are targeted towards the US. A further 10 percent is focused on China and 9 percent towards the UK. Across Europe, Germany is the next most targeted market, attracting a further 4 percent of capital.
Hans Vrensen, global head of research at DTZ, said: “Funds continue to remain focused on their home market or region, reflecting the uncertain market environment and investors’ risk aversion. In both EMEA and the Americas, more than 90 percent of capital is to be deployed domestically or within the same region.”
Asia Pacific, however, is the exception. “Asia Pacific is the only market where we see a higher proportion – close to a quarter of new capital – coming from outside of the region,” Vrensen added. “With just 5 percent of capital deployed in Asia Pacific from outside the region in 2012, this data points towards significantly higher levels of cross-border investment into the Asia-Pacific region.”