John Carrafiell, head of Morgan Stanley's European Real Estate Group told the British Council for Offices conference in Berlin last week that almost $20 billion has already been raised by opportunity funds such as PRICOA, MSREF, Whitehall, GE Capital, Soros and Peabody. And others are even more bullish: Jonathan Short, Chief Executive of PRICOA Property Private Investment, repeated Goldman Sachs' estimate that $25 billion had been earmarked for European investment.

US funds are under pressure to increase their exposure to real estate after over-buying equities. For instance Carrafiell said Morgan Stanley's chief analyst is recommending they increase exposure to around 15% of total investment over three to five years. Real estate currently averages less than 4%.

While the slowing US economy means opportunities are limited at home countries like the UK, Germany and Italy are lagging in the economic cycle. And the late acceptance by European corporations and public bodies of the benefits of outsourcing is releasing a great deal of stock onto the market unlike the US, where vendors are reluctant to sell into a falling market.

Carrafiell told the conference that increased supply should prevent he US buying spree from driving down yields to unacceptable levels.