Commercial & Industrial Property News Update

Asia Pacific - Global Real Estate Capital Increased 4%


October 11, 2012

A recent report by property adviser DTZ said that the amount of global investment capital available real estate deals has increased by 4%.


In an unexpected turn of events, a rise in new equity in Europe has boosted global investment capital for real estate deals in 2013. This was revealed in DTZ's latest "Great Wall of Money" report, which is based on a bottom-up analysis tracking the activity of more than 1,900 separate funds and other investors around the world.

For 2013, available capital targeting direct commercial real estate has grown to USD 311 billion globally, rising 4% from USD 298 billion six months ago.

"The increase is a surprise given the continued uncertainty in the euro-zone," DTZ said.

"This increase reflects pent-up demand as legacy funds struggle to deploy capital as investment activity remains weak."

Besides rising European capital, the expansion of potential investment capital was also driven by Asian and American investors who have become more optimistic about leverage.
Capital increased in all regions, except in the Asia Pacific, where potential investment capital fell by 4% to USD 80 billion for next year.

Although there was an increase in overall available capital, the equity element has remained flat over the period at USD 139 billion compared with the end of last year. However, in the EMEA region, available equity increased by 7% to USD 58 billion, noted DTZ.

The euro-zone recorded investment volumes of € 50 billion in H1 2012, lower than the long-term average of € 65 billion.

"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," said the report.

DTZ predicted that this would see a narrowing as banks focussed on their secondary portfolios and growing regulations forced further deleveraging.

The report added that property investors worldwide are shifting their focus to single-country funds, with players choosing to go with what they know best.

Of all available capital, 57% are accounted for by single-country funds. This was the highest share since 2009, when the report was first published.

Of single-country funds, the largest proportion, 46%, was put in the US. However, this proportion had been falling steadily since its 2010 peak.

Additionally, investors are exercising greater preference for home markets and regions, reflecting increased risk aversion among players.

This was especially prevalent in the Asia Pacific, which is the main focus of regional capital at the moment.

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