A research produced by DTZ
Available capital for investment in to commercial real estate markets during 2012 has fallen 6% to US$298bn globally in the last six months.
This decline in available capital was due to a 12% reduction in debt, which overwhelmed the 4% increase in equity capital. The average LTV ratio was down from 58% to 54% over the same period. Total available capital fell as funds put existing money to work, eating in to the stock of capital already raised. This was only partly offset by an increase in new capital, up to US$53bn from US$30bn. Our data indicates increased levels of cross border investment into APAC and EMEA. APAC remains popular, with 33% of investment capital coming from outside the region. This compares to EMEA at 19% and the Americas at 8%. The US and APAC now make up 64% of targeted capital. This is not surprising as they contain a larger number of attractive markets as indicated by the DTZ Fair Value Index™. However, we have not yet seen a corresponding decline in the capital targeting EMEA despite markets becoming less attractive.
Available capital could be at risk, as many funds were raised before 2009 and now near the end of their investment period. This is especially relevant as:
- Managers will seek to deploy this capital rather than return the investors’ commitments and endanger their core fee income
- 55% of available capital at risk is with opportunity funds
- Attractive opportunities for these at risk funds are expected to come from bank loan portfolio sales, across Europe in particular
Source: DTZ (Groupe UGL)