Global Capital for CRE Investment Reaches New Heights in 2015

By Barbra Murray, Contributing Editor

Click on image to enlarge (courtesy of Cushman & Wakefield)

New York—According to Cushman & Wakefield‘s new Great Wall of Money report, newly-raised capital available for investment in the global market reached new heights in 2015 at a record $443 billion. And the commercial real estate services firm expects the figure to swell in 2016.

While available capital was off the charts, growth actually went on the downswing, dropping from 21 percent in 2014 to just 3 percent in 2015. But positive growth is positive growth. The number was highest in Asia Pacific, where the $131 billion in available capital marked an 8 percent increase. And although the Americas saw just a 2 percent increase in capital growth, the region—with the U.S. leading the way—still topped the list with $169 billion.

The money is being invested all over the place—or in just one location. Per the report, 58 percent of investors are focusing on a single geography, while 42 percent are targeting multiple countries. Again, more eyes are on the Americas, where 48 percent of single-country investors are placing their funds. Asia Pacific follows with 30 percent and EMEA brings up the rear with 22 percent. Additionally, with diversification in mind, cross-border activity will continue to increase.

And while most investors prefer to focus on a single country, they aren’t focusing on single asset types. Multifamily remains the investor favorite, attracting 23 percent of capital, with much of that figure honing in on the U.S. market. Europe, specifically Germany and the Netherlands due to their large rental markets, are moving up on the radar.

But just how investors invest, will evolve.  “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 will favour preferred managers with strong track records. In addition, 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,” Carlo Barel di Sant’Albano, chief executive of C&W’s Global Capital Markets & Investor Services business, said in a prepared statement.

However, there’s nothing in the forecast that will dampen the allure of the commercial real estate market. As noted in the report, “Continued volatility in equity markets is also supporting flows of capital into direct markets. As a result, we anticipate record levels of new capital for investment in commercial real estate.” Specifically, C& W predicts 4.2 percent growth in investment activity in 2016.” That capital will continue to target the  large and liquid markets around the world, namely, the U.S., China, the U.K. and Germany.