Institutional investors are expected to increase their target allocations for real estate investment this year to 9.6%, up from 9.4% in 2014, Colliers International has revealed in its latest research report entitled ‘How long will this property bull market last?’
Institutional investors are expected to increase their target allocations for real estate investment this year to 9.6%, up from 9.4% in 2014, Colliers International has revealed in its latest research report entitled ‘How long will this property bull market last?’
The property adviser noted that the 'seemingly modest increase' amounts to an extra $52.5 bn (€48 bn) in the market given the size of the capital pools, which gives a significant boost to overall funds targeting global real estate this year.
It follows a $105 bn increase on the previous year when target allocations rose from an average of 8.9% of existing portfolios in 2013. If these allocation rate increases are applied more widely across private equity and sovereign wealth funds, the total uplifts would amount to $160 bn in 2014 and $80 bn in 2015. Total global funds under management currently amount to $32 tln.
Walter Boettcher, EMEA research director and economist at Colliers International, said: 'Weight of capital as an investment driver is certainly not a new phenomenon, but remains undiminished in this particular cycle. However, what is new is the extent to which property investment has become globalised with funds needing to reach beyond their domestic borders to satisfy their target allocations to property. This is driven by the extraordinarily low interest rate environment and an international search for yield, with property offering relatively high returns compared to bonds and equities. The UK and Europe remain primary international targets with funds showing a greater appetite for risk.'
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