Up to £36 billion of capital will be available for investment in real estate in the UK in 2010 according to DTZ Research.
This is double the £18 billion of capital transacted in the past 12 months. The ratio of capital targeting real estate will be 2:1, the equivalent to £2 of capital chasing available stock compared with only £1 in the past 12 months.
‘The great wall of money’ report predicts that $315 billion of capital will be available for investment in real estate globally in 2010, double the $157 billion of capital transacted in the past 12 months.
Of the £36 billion of capital targeting the UK in 2010, DTZ Research estimates that £20 billion (55 per cent) is from UK domiciled funds, about
£10 billion (27 per cent) is from US domiciled funds and almost £2 billion (6 per cent) is from German open-ended funds, special funds and closed funds. The remainder is predominantly from the rest of Europe.
Nigel Almond, associate director of Real Estate Strategy at DTZ Research, said: “We expect to see a high proportion of UK capital staying in the UK in 2010. Whilst market uncertainty persists, investors are keen to use their home advantage to maximum effect and minimise risk.
“This contrasts to US investors, who are more likely to invest overseas, witnessed by the return of US private equity. We are also expecting to see a marked increase in the activity of German funds, following their re-emergence in the third quarter of 2009.”
Of the £36 billion of capital targeting the UK in 2010 £18 billion is from funds that are solely targeting the UK. The remainder is coming from funds targeting the UK as part of multi-country strategies.
Mr Almond said: “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. Those that are investing in a single country are predominantly focused on the major liquid markets of the UK and the United States, accounting for nine per cent and seven per cent of total global investment respectively.”
Hans Vrensen, global head of research at DTZ, said: “There is a considerable amount of commercial real estate lending due for refinancing over the next two to four years. Data on this is hard to come by and much depends on the impact of government and central bank policies on banks.
“Although some of the available capital may be diverted, for example through the provision of debt financing, we expect that the de-leveraging and unwinding of support policies will be slowly phased in over time, limiting the immediate impact in 2010.”
Geoff Thomas, Birmingham-based regional chairman of DTZ, said: “In the Midlands we are already seeing the impact of this wall of money as the rolling average of investment transactions in the region has increased from
£185 million six months ago to
£300 million today. Deals include the £101 million sale at Brindleyplace to Tritax and 1 Snowhill being sold to a German fund for £126 million.”