New capital targeting commercial real estate globally grew to reach a record of $443bn (€400bn) last year, according to Cushman & Wakefield.
The company’s ‘Great Wall of Money’ report, released at MIPIM today, tracks the amount of newly raised capital targeting real estate at the global level.
The report shows the flow of capital is unrestricted, as investors seek opportunities across the world.
The pace of growth is capital-raising is slowing, however, even though investment activity in many markets is approaching record levels.
Last year’s 3% increase is weaker than the 21% growth recorded in 2014.
Cushman & Wakefield recorded growth in available capital across the three regions, led by the Asia Pacific, with an 8% increase to $131bn.
The figure was bolstered by the closing of a number of funds last year.
Despite this increase, however, the region attracts the least capital.
Both the EMEA and the Americas saw capital expand by less than 2%.
Across the EMEA, Cushman & Wakefield said there was $143bn of new capital, while the Americas still attracts the lion’s share at $169bn.
Actual raised capital has started to decline – albeit by less than 1%, from $408bn to $407bn.
Cushman & Wakefield said the fall showed raised funds were more focused on deploying capital, particularly in the EMEA’s case, where raised capital fell by 4% over the year to $131bn.
Meanwhile, the Asia Pacific saw a modest rise of 3%, while the Americas was up by less than 1%.
Carlo Barel di Sant’Albano, chief executive at Cushman & Wakefield’s global capital markets business, said: “As global equity markets face increased uncertainty, factors such as quantitative easing and lower-for-longer interest rates will sustain the relative attractiveness of commercial real estate, helping to bolster the continued flow of capital into real estate and related funds.”
With available capital at record levels, effective deployment, Sant’Albano said, becomes a critical concern for investors.
“This will benefit the large and liquid markets of the US, China, the UK, Japan and Germany,” he said.
“We also expect the strong momentum of cross-border flows to continue as investors seek to diversify across markets.
“As opinion on the future of the markets becomes increasingly divided, we anticipate there will be a further transformation in the way in which capital is allocated.”
Investors will focus on de-risking decisions and favour preferred managers with strong track records, he added.
“Given the significant capital allocated to real estate, investors will evaluate joint venture and platform deals as a route to deploy capital more easily in the market,” Sant’Albano said.
Cushman & Wakefield predicts the Americas will achieve the greatest amount of domestic investment, with 71% of available capital raised domestically.
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