Sovereign wealth fund property buying spree expected
|Saturday, 04 October 2008|
Sovereign Wealth Funds are expected to become one of the most significant investors in the world's commercial property markets, according to the latest analysis.
They are expected to have a major impact potentially investing as much as $725 billion over the next seven years, according to a new global report from CB Richard Ellis.
Although more than half of the SWFs are believed to already hold direct commercial real estate investments, allocations to the sector are expected to rise substantially with those based in the Middle East leading the way.
'More investment will flow from key Gulf SWF's as a consequence of high inflows of capital,' said Nick Maclean, CB Richard Ellis's Managing Director for the MENA Region.
'Typical safe havens will include central London, but other trophy real estate targets will figure such as Abu Dhabi Investment Council's acquisition of New York's Chrysler Building earlier in the year,' he added.
It is widely thought within the industry that SWFs have been waiting on the sidelines to see just how low prices are likely to become before going in. Investing in real estate suits these funds because of its long term appreciation.
Until now SWFs have tended to target the US. Now they are expected to diversify with the UK and Europe on their shopping list. Japan is also another likely target.
As well as actual buildings, SWFs are also setting their sites on property companies, listed and unlisted.
'Although SWFs are likely to continue to focus on core real estate products in major markets, they will have to put capital to work in new geographies and emerging sectors. Favored future destinations are expected to include Japan, the UK and other countries with currencies that are not held in the SWF's foreign reserves,' said Michael Haddock, Director EMEA Research, CB Richard Ellis.
'However, SWFs will have to look to both the indirect investment market and the debt market to fully meet their objectives in the real estate sector. It is also very possible that we will see outright acquisitions of property companies as a way of assembling a significant direct real estate portfolio rapidly as well as acquiring the property management infrastructure to go with it,' he added.
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