‘Wall of equity’ hanging over market mounts to EUR 250 bn, says CBRE

Property broker CB Richard Ellis estimates that the ‘wall of equity’ waiting to get back into the European property has mounted to nearly EUR 250 bn. In an interview with PropertyEU at EXPO REAL in Munich, CBRE’s head of EMEA Research Nick Axford said there’s no shortage of money out there ‘The big question right now is when it will start coming back into the market. And anyone says he knows when that will be is either lying or fooling himself.’ The equity currently sitting on the fence will come from four sources, Axford said.

German open-ended funds have around EUR 15 bn equity to invest. Leverage will take this to around EUR 20 bn. ‘Basically, legislation means they’ll have to invest in property, possibly even before the end of this year.’ The second source of equity is state-owned sovereign wealth funds. ‘This is very difficult to predict, as they’re very secretive. But property, which is the perfect investment for sovereign funds, is only about 4% of their total investments. If they increase this to a normal weighting of say 10%, that’s around EUR 40 bn in new investment.’

‘Traditional’ players, both listed and unlisted funds, and institutional investors are also sitting on the fence, he added. ‘We looked at 60 major players, making up around a quarter of the property universe – or EUR 1.4 trn – and we reckon they have EUR 96 bn to invest. Leverage would take that to more than EUR 180 bn,’Axford said. And recovery funds have around EUR 11 bn - or EUR 30 bn with leverage - waiting on the sidelines, according to CBRE estimates.