Published December 18, 2009


Investment in Asia-Pac properties seen doubling

But DTZ notes that one major caveat is the capital required for de-leveraging


ABOUT US$85 billion will be available for direct investment in real estate across the Asia Pacific next year, double the US$43 billion transacted in the past 12 months, says DTZ Research.

The US$85 billion equates to 27 per cent of the US$315 billion total capital available for direct investment in real estate worldwide in 2010, DTZ says in its The Great Wall of Money report issued yesterday. The report analyses data generated by DTZ Research's equity tracker.

It also says 2010 worldwide transaction volume should be more than double this year's US$157 billion and could return to the level last seen in 2004.

Globally, the ratio of capital chasing real estate is about US$2 for every US$1 of deal volume. The ratio is relatively higher in Europe at closer to 2.2, compared with 2 in the Asia-Pacific and 1.8 in the Americas.

'Asia Pacific and Europe are relative winners, with more money targeting these regions for investment than they are raising and investing elsewhere,' DTZ's report says. 'Together, these regions are targets for 77 per cent combined of the total investment in 2010 but are raising only 49 per cent of available money.'

But DTZ cites one major caveat - capital required for de-leveraging. It points to the considerable amount of commercial real estate lending due for refinancing over the next two to four years.

'While some of the available capital may be diverted to this purpose - for example, through provision of debt financing - we expect the de-leveraging and unwinding of support policies will be slowly phased in over time, limiting the immediate impact in 2010,' it says.

Third party-managed funds are the largest investor category, accounting for 60 per cent of available equity, followed by institutions with 28 per cent and sovereign wealth funds with 6 per cent. The remainder has been raised by German open-ended funds, publicly listed companies and various private companies/high-net worth investors.

DTZ says 81 per cent of total capital raised is being directed towards multi rather than single-sector investments. Just 19 per cent of the capital has been raised to target a specific property sector only - chiefly industrial (5 per cent), office (4 per cent) and retail (3 per cent).

As well, 70 per cent of total capital is targeting two or more countries. Those investing in a single country are predominantly focused on the major liquid markets of the UK and US, accounting for 9 and 7 per cent respectively of total planned investment. Germany, China and Japan are expected to make up a combined 5 per cent of planned investment.

'Globally, most investors are adopting multi-sector and/or multi-country strategies as part of sector and geographic diversification strategies, and reflecting the opportunistic nature of most fund mandates,' says Nigel Almond, associate director of real estate strategy at DTZ Research.