Liquid real estate Issue 06
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Forecasts for sovereign wealth funds’ investments in real estate
The sovereigns are coming
Loving London
According to Philippe Tannenbaum, director of research at Eurohypo in London, predicting a volume of investment from the sovereign funds requires two data streams to be analysed: the flows (which of annual new investment might be directed toward property), and the stocks (the target proportion of real estate within the assets under management). In a five-year investment period, with a combination of sustained rapid growth of the assets under management and of high targets for the property included in them, the annual investments would represent about 40% of the actual global direct investment.
| Forecasts for sovereign wealth funds’ investments in real estate* (All figures: $ bln) |
|
Example 1: the existing assets increase of more or less 10% per year [1] |
Example 2: $12,000 billion in 2015 |
Example 3: $12,000 billion in 2012 |
| Approach through flows |
| Compounded new investment per year, all sectors mixed |
430 |
1,100 |
1,800 |
| Out of which real estate |
| Scenario 1: 5% of the new investments |
21 |
55 |
90 |
| Scenario 2: 7% of the new investments |
30 |
77 |
126 |
| Scenario 3: 12% of the new investments |
52 |
132 |
216 |
| Approach through stock |
| Target of 5% of assets under management within 5 years |
48 |
85 |
120 |
| Target of 7% of assets under management within 5 years |
68 |
119 |
168 |
| Target of 12% of assets under management within 5 years |
116 |
204 |
288 |
| Source: Eurohypo Research |
| [1] That is: reinvesting the profits, no new money place into the funds. Gives an approximate size of $5 billion in 2012 and $6.5 billion in 2015 |
