May 11, 2015

Record level of capital investment in commercial real estate

Record level of capital investment in commercial real estate

According to the DTZ’s Great Wall of Money report, total capital invested in commercial real estate reached a new global record of USD 429 billion at the end of 2014. This growth was supported by funds stemming from equity raising by companies. However, the growth rate of new measures fell to 5 percent at the end of December, from 15 percent in the middle of 2014.

The biggest increase in capital available has been reported in both Americas – growth by 12 percent to USD 166 billion, whereas in Asia and Pacific capital grew by 4 percent to USD 122 billion. In EMEA, there was a 1 percent decrease in capital to USD 141 billion, which was driven by a strengthening of the dollar against euro over last months.

The majority of capital raised was generated by funds targeting multiple property types. At the end of 2014, over 70 percent of funds invested in more than one sector, although the share of this group of investors shrunk by close to 10 percent compared with 2013. Funds targeting a specific asset class rose by 29 percent in the corresponding period.

In the case of funds dedicated to a specific type of property, the largest share in the portfolio was occupied by residential space (23 percent), industrial (19 percent) and retail (18 percent).

At the end of 2014, single country funds possessed the majority of available capital (59 percent), whereas 41 percent of capital accounted for funds seeking investment opportunities in multiple markets. This reverses the downward trend in these investors stake observed since 2012.

The largest share of new capital available for commercial real estate investments accounted for the United States (USD 145 billion), the United Kingdom and China (each close to USD 47 billion), Japan (USD 29 billion), Germany (USD 24 billion) and France (USD 23 billion).

“The increase in new capital reflects a continued appeal of commercial real estate as compared to treasury bonds. With improving liquidity on the markets, we expect that investors’ demand will contribute to higher volume of investment transactions in the next 12 months,” said Craig Maguire, Head of Capital Markets, DTZ.
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