UNITED STATES - Pramerica Real Estate Investors have found a huge sum of investible capital is currently sitting on the sidelines in the United States, as investors are unsure whether now is a good time to invest given market conditions.
This revelation was unveiled by the real estate manager in its latest research report, called Waiting for Distress, which is based on interviews with investment executives said Philip Conner, principal in Pramerica's research department.
"There is a lot of capital waiting around and not being invested at this time. The question for investors is when to come back into the market. But no-one seems to know at this time."
That capital which is not being invested at this time includes money that has been allocated for real estate investment by pension funds and commingled funds and where the money raising has been completed.
Conner suggests investors are holding out in part because they are waiting for the anticipated drop in commercial real estate values.
"In the near term, commercial asset values will fall perhaps as much as 15% to 20% from the peak to trough," said Conner.
Up to this point, there have been few distressed opportunities, one reason being, according to Pramerica, the lack of development that occurred in the previous real estate cycle.
This has kept the overall market fundamentals fairly strong, according to the real estate manager as there is still decent demand for leasing space and rents on most commercial properties have held up pretty well, so the property types most affected are the housing and retail markets.
"The housing bubble has led to some big problems in many markets around the country. These would include places like Southern California, Phoenix, Las Vegas and Florida," Conner said.
The retail property market has also been hit hard as it is recognised many US consumers have less disposable income now the value of their homes has dropped and price of fuels has risen.
"There just are not a great deal of lending sources out there and this has made it very difficult for owners of commercial real estate to sell any assets," added Conner.