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$97 Billion Targeting U.S. Real Estate in 2011

A new study by DTZ Research, a division of British real estate services firm DTZ, finds that global investors are prepared to plow some $97 billion into the U.S. commercial real estate market in 2011. That represents a 54% increase over DTZ’s previous estimate in December 2009, the same month it launched the study.

On a global basis, DTZ estimates that $281 billion of capital will be available to invest in global real estate in 2011, a 22% increase over its previous estimate.

The firm’s latest The Great Wall of Money report analyzed the capital being raised by an extensive range of investor groups. The greatest increase in available capital is forecast to be focused on the U.S. ($97 billion), which is in line with the “DTZ Fair Value Index” score of 89. That score indicates that most markets in the U.S. now offer an attractive opportunity to investors.

Another $71 billion is targeting the Asia Pacific region, an increase of 29%.

And while the majority of available capital continues to target Europe ($112 billion), this is unchanged from DTZ’s December 2009 estimate.

“The current attractiveness of the US is in stark contrast to the situation a year ago,” says Nigel Almond, Associate Director of Forecasting & Strategy at DTZ and author of the report. “Most U.S. markets were cold, offering expected returns below risk adjusted required returns. This opportunity remains largely unexploited to date, since transaction volumes in the U.S. have not yet seen the levels witnessed in Europe and Asia Pacific.”

The DTZ report highlights the return of quoted and private property companies to the market, with publicly listed companies now comprising 17% of available capital, compared to 4% reported in December 2009. Capital from private property companies and individuals now accounts for 14% of available capital, rising from 3% previously. Third-party managed funds, while still accounting for the majority of available capital, have decreased their share from 77% to 49%.

DTZ data proves that diversification by both geography and property type continues to be a priority for investors. In line with the previous analysis, the majority of capital is due to be invested in multiple countries. However, this share of capital has decreased from 70% to 56%, highlighting a growing focus on single-country investments. Of those investing in single countries, there has been a significant increase in funds targeting the U.S. The U.S. now accounts for 51% of available single-country focused capital.

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