RCA on the investors seeking direct access to real estate

    Real Capital Analytics executive managing director Simon Mallinson highlights the headline numbers for the institutions taking the direct route into the property market.

    The top 100 institutional investors in PERE’s 2020 Global Investor 100 have myriad opportunities with which to access global real estate. While many choose to invest in a range of funds with differing geographic, sector and risk focuses, they could also look to place capital in the liquid listed real estate investment trust markets, choose to lend to other real estate owners, or even take a bet on the limited array of commercial real estate derivatives.

    And yet, many remain rooted in the belief that a direct exposure to real estate is the best way to allocate. Here, I utilize Real Capital Analytics’ unique global commercial real estate transaction database to see what those 100 investors have bought and sold directly in 2020.

    Covid effect kicks in

    This cohort of investors bought $85.6 billion of new real estate in the 12 months through to the end of  June 2020, while they sold a little over $67 billion, for a net new $18.5 billion placed in the direct market. Covid-19 already appears to be impacting investment decisions, as total acquisitions were smaller than in the prior 12 months, while dispositions were greater.

    In the 12 months to June 2020, GIC was the biggest buyer of real estate, with the April 2020 acquisition of LG Twin Towers in Beijing for more than $1 billion, helping push them to the top of the list. Allianz, which sold little in comparison with its buying activity, was the top net acquirer of real estate.

    The largest net seller was the Abu Dhabi Investment Authority, the top-ranked institution in the GI 100, which disposed of assets across the world such as Gioia 22 in Milan, Central Plaza Two in Brisbane and 330 Madison Avenue in New York. The Madison Avenue office property sold for $900 million in February 2020, just prior to the full impact of covid-19.

    Residential appeals

    The apartment sector was most appealing to this group and they spent more than $18 billion in the year to Q2, compared with $15 billion in the same period ending Q2 2019. In sync with global trends, this cohort of investors sold 75 percent more hotels and 95 percent more retail assets than they did in the 12 months ending Q2 2019.

    Some in PERE’s list of top 100 real estate investors became household names making canny investments following the global financial crisis. Whether the fallout of covid-19 offers them the same attractively priced opportunities remains to be seen, but they certainly have the firepower to take advantage.