Property investments in APAC region to double in 2010

Property investments in APAC region to double in 2010
Dec 21, 2009 - PropertyGuru.com.sg

The Asia Pacific region will have around $85 billion to spend for direct investment in property by next year. The amount is twice the $43 billion transacted in the past 12 months, according to DTZ Research.

The $85 billion translates to 27 percent of the total capital worth $315 billion, which will be available in 2010 for direct investment in property worldwide, added DTZ in its "The Great Wall of Money" report yesterday.

DTZ also said that worldwide transaction volume in 2010 should be more than double the $157 billion this year and could return to 2004 levels.

Globally, the capital chasing property ratio is around $2 for every deal volume worth $1.

“Asia Pacific and Europe are relative winners, with more money targeting these regions for investment than they are raising and investing elsewhere,” according to DTZ's report. “Together, these regions are targets for 77 per cent combined of the total investment in 2010 but are raising only 49 per cent of available money.”

However, it cites one main caveat - capital necessary for de-leveraging. It refers to the substantial amount of commercial property lending which is due for refinancing within the next two to four years.

“While some of the available capital may be diverted to this purpose - for example, through provision of debt financing - we expect the de-leveraging and unwinding of support policies will be slowly phased in over time, limiting the immediate impact in 2010,” said DTZ.

The largest investor category is the third party-managed funds, which accounts for 60 percent of available equity. It is followed by institutions with 28 percent and sovereign wealth funds with 6 percent. The German open-ended funds raised the remaining equity.

According to DTZ, 81 percent of the total capital yield is being directed towards multi-sector investments than to the single-sector investments. Only 19 percent of the capital was reserved to target a specific property sector - primarily in retail (3 percent), industrial (5 percent) and office (4 percent).

Also, 70 percent of the total capital will target two or more countries. Those who invest in a single country are mainly focused on the prime liquid markets of the US and UK, accounting for 7 and 9 percent respectively of total planned investment. Expected to compose the combined 5 percent of planned investment are China, Germany and Japan.

“Globally, most investors are adopting multi-sector and/or multi-country strategies as part of sector and geographic diversification strategies, and reflecting the opportunistic nature of most fund mandates,” said DTZ Research’s associate director of real estate strategy, Nigel Almond.