Asia Pacific and UK likely winners for property fund investment in 2010

Tuesday, 22 December 2009 10:17

Asia Pacific and UK likely winners for property fund investment in 2010, analysts predict

Some £36 billion of capital will be available to invest in UK real estate in 2010, double the amount spent in 2009, according to a new report.

UK, US and German funds are likely to be chasing property in the UK next year with some £20 billion expected to come from UK funds, £10 billion from US funds and £2 billion from German open ended funds, according to the report, The Great Wall of Money from DTZ Research.

Half of the money is expected from funds that are solely targeting the UK and the other half is from funds targeting the UK as a part of multi-country strategy.

The increase in capital is also reflected globally. DTZ estimates that $315 billion of capital will be available for investment in real estate globally in 2010, double the $157 billion spent in 2009.
The report also says that about $85 billion will be available for direct investment in real estate across the Asia Pacific region next year, double the $43 billion transacted in the past 12 months.

‘Asia Pacific and Europe are relative winners, with more money targeting these regions for investment than they are raising and investing elsewhere. Together, these regions are targets for 77% of the total investment in 2010 but are raising only 49% of available money,’ the report says.
‘We expect to see a high proportion of UK capital staying in the UK in 2010. Whilst market uncertainty persists, investors are keen to use their home advantage to maximum effect and minimise risk,’ explained Nigel Almond, associate director of Real Estate Strategy at DTZ Research.
‘This contrasts to US investors who are more likely to invest overseas, witnessed by the return of US private equity. We are also expecting to see a marked increase in the activity of German funds, following their re-emergence in the third quarter of 2009,’ he added.

DTZ also said that it expects deleveraging to have an impact, but not immediately. ‘There is a considerable amount of commercial real estate lending due for refinancing over the next two to four years. Data on this is hard to come by and much depends on the impact of government and central bank policies on banks,’ explained Hans Vrensen, global head of research.
‘Although some of the available capital may be diverted, for example through the provision of debt financing, we expect that the deleveraging and unwinding of support policies will be slowly phased in over time, limiting the immediate impact in 2010,’ he added.