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Fewer Funds Available for Global Real Estate Investment

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finance  real estate sector  real estate investments  real estate investment opportunities  CB Richard Ellis  CBRE  Debt Finance  Nigel Almond  Philip Cropper  real estate finance 

Fewer Funds Available for Global Real Estate Investment

By - Friday 09 March 2012

The amount of cash expected to be made available for global commercial property investments has fallen by six per cent in 2012, compared to the capital on offer in the middle of last year. The latest DTZ Great Wall of Money report revealed USD 298 billion (GBP 189 billion) has been raised to fund real estate investment opportunities, down from the USD 316 billion record in mid-2011. The organisation pointed out this is the result of a 12 per cent reduction in the level of debt finance available to investors.

However, equity capital climbed by four per cent over the last six months, helping to rein in the negative impact caused by more cautious lending criteria set by international financial institutions. Associate director of forecasting and strategy at DTZ and author of this report Nigel Almond noted the fall in the amount of money accessible for real estate investments "reflects the current environment of less-available and more expensive debt". He added: "We are not surprised to see funds reduce their target gearing as they seek to place more equity into deals."

A recent survey conducted by CB Richard Ellis (CBRE) revealed many property professionals in Europe believe the main stumbling block to the recovery of the continent's real estate sector is the lack of debt finance. Nearly half (43 per cent) of the investors questioned stated they had altered their property investment activity as a result of being unable to obtain a loan for the kind of assets they wanted to buy or because the terms offered by the bank were  unfavourable. Philip Cropper, managing director of real estate finance at CBRE, explained the establishments still providing finance "remain focussed on prime assets in key markets", while the conditions attached to loans "often vary widely depending on the borrower".  He added insurance companies emerged as the most competitive lenders towards the end 2011, although he noted such firms can only go some way towards replacing more established players in the market.

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