Liquid real estate Issue 06
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 |
