C&W: Global CRE Capital Up Again

A record $443 billion in capital now targets commercial real estate globally, up 3 percent from a year ago, reported Cushman & Wakefield, New York.

The figure represents the highest amount recorded since the firm started tracking in 2009, “with no limits to where this capital is flowing,” Cushman & Wakefield Director Nigel Almond said in C&W’s Great Wall of Money report. “Indeed, as all regions are targeted by this great wall of money, investment levels will likely reach record or near-record levels in an increasing number of markets.”

Almond said that as global equity markets face increased turbulence and uncertainty, factors such as quantitative easing and lower-for-longer interest rates in many locations will sustain commercial real estate’s relative attractiveness and bolster continued flow of equity into funds. “Capital will continue to seek the large and liquid markets of the U.S., China, U.K., Japan and Germany. Further, as investors seek to diversify across markets, we expect the strong momentum of cross-border flows to continue.”

But with investment activity approaching record levels in some markets, the pace of growth in capital raising is slowing, the report said. Last year’s 3 percent increase fell well short of 2014’s 21 percent growth and reflects how active investors have been in putting their capital to work in an increasingly buoyant market.

Available capital grew in all three global regions, C&W said. Asia-Pacific led with an eight percent increase to $131 billion. But despite the strong increase the region attracted the least capital. Both Europe-Middle East-Africa and the Americas saw capital expand by less than 2 percent. EMEA saw $143 billion of new capital and the Americas attracted $169 billion.

Leverage levels remained broadly unchanged but edged down across all regions, C&W said. EMEA continued to see the lowest leverage, averaging 48 percent, with leverage across Asia-Pacific at 54 percent and the Americas at 57 percent.

“The low levels [of leverage] not only reflect conservative terms offered by lenders but also discipline from investors,” the report said. “We would not be surprised to see activity above these levels–though clearly it highlights that both investors and lenders are disciplined on risks.”