Compared to Q3 of 2016, transactions involving global real estate
investment showed a 2.2% rise in Q3 of 2017. Compared to Q1-Q-3 of
2016, U.S. volume for 2017 was also up 2.8% to $660 billion.
Despite volume increases, the high level of transacting activity in
the market may suggest a bigger issue at play. From 2009 to 2015,
real estate capital flow growth averaged 31%. A global survey
showed that 25% of investors cited access to available properties
as the most common obstacle in investments. Now, follow the
financing to see if this is indeed the issue at hand, according
to Neil Shekhter, founder and CEO of Santa
Monica-based NMS Properties.
The capital held for investments through U.S. pension funds,
sovereign wealth funds and insurance companies is $94 trillion,
which is indicative of strong growth patterns over the last decade.
Around 8.5 trillion of that figure targets real estate. That said,
only 6.5 trillion was deployed as of 2017, which indicates a
significant under-allocation of real estate equity.
In regards to the global REIT sector, the market capitalization is
1.6 trillion, which is fairly congruent with how much capital was
invested. Global private wealth accounts for $67 million and others
around $4 trillion in commercial real estate, Neil Shekhter points out.
Hard data concerning global debt isn't often available or reliable.
The U.S., however, has a known $3.9 trillion worth of private and
public debt in Q3. A fair estimate would be $2.1 trillion for Asia,
$1.2 trillion for Europe, and around $8.2 trillion globally.
Investable global real estate in 2016 was valued at approximately
$27 trillion. However, there are under-allocation funds that still
haven't been deployed into the market, such as 7% from
institutional under-allocation that's still held in owner-occupied
portals and private wealth.
Looking Toward The
With a little ingenuity, it should be much easier for institutions
to get the properties they seek.
Corporate sector investment properties are abundant, especially in
Asian and European markets due to owner-occupation rates being so
high there. Sale leaseback activity, for example, over the last
year or so has been in an upward tick. In the future, investors may
also push further into the residential and new development
sectors, Neil Shekhter notes.
The supply of available investment properties isn't increasing
faster than the sources of capital looking to invest. Institutional
equity is fueled by 160 million people joining the middle class
annually, almost 90% of which will be in Asia.
The average global allocation to real estate is set to grow to over
10% in Asia over the next two years. That's a significant growth of
8.6% from last year's figures. In the U.S., this growth will be
upwards of $11.4 trillion by 2020.
In closing, the prevailing message is that there isn't some
shortage in reasonable investment properties. Instead, it's that
the equity will be about 9% higher and the rate of GDP growth
will only be at 3%. Investors must act quickly in implementing
investments in a long-term real estate investment plan.