Previously in this space (“Capital Surge” and “Capital Surge: Part 2“) we’ve discussed a couple of interesting conclusions from the Cornell University’s Baker Program in Real Estate & Hodes Weill study the “2013 Institutional Real Estate Allocations Monitor” in relation to more recent news.
A third key take-away from the survey that caught our attention is the shift towards an increasingly global, cross-border investment strategy for many institutional investors. One of the more revealing stats is that Asia-Pacific investors are currently under-invested by 130 bps and also plan to raise their targets by 140-150 bps (i.e., almost 300 bps of their portfolio’s total size will be newly invested in real estate in the near-term). So, don’t be surprised as this set of investors ramps up their investment quite rapidly.
In addition, despite being not as under-allocated, 38% of North American investors (compared to 24% of investors from Asia-Pacific) revealed their intent to increase their investment into private real estate during 2014, according to data-provider Preqin. So whether capital placement is driven by need or want the conclusion remains that capital placement certainly will be on the rise, and not only in investors’ back yards. For instance, of the North American investors seeking investments in the next 12 months, 38% are targeting Europe, which is up from 17% a half-year ago. 60% of Asia-Pacific investors are aiming at Europe, versus 39% a half-year ago. Those are impressive jumps.
Furthermore, CBRE released a report earlier this week regarding Middle East capital flows into real estate (“In and Out – Middle East”). This research report anticipates a substantial amount of capital flowing from that region over the next decade. CBRE estimates $180 billion will be invested by Sovereign Wealth Funds (SWFs) and private investors from the Middle East in Europe (80%), the Americas (10%) and Asia-Pacific (10%). The domestic markets don’t have nearly enough volume to absorb the SWF’s investment targets, hence the capital predominantly goes internationally. By comparing this amount to the $45 billion invested between 2007 and 2013 we can begin to understand how significant an increase it is.
Therefore, in order for these investors who are escalating their investment volumes internationally to invest further and further from their front door, it requires technology to bridge that geographic gap. Evolving technology will allow institutional investors to use their resources effectively from a central base – for both identifying & sourcing investment opportunities as well as organizing multiple due diligence processes efficiently. Moreover, investment managers can benefit from the same technology by being able to extend their marketing reach to capital partners further afield.
This is the Sterlinks blog. Access Sterlinks tools to maximize your internal resources by visiting http://www.sterlinks.net.