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SWFs Expecting to Invest $725B into Global CRE

LONDON-A global report from CB Richard Ellis is predicting that Sovereign Wealth Funds are looking to invest $725 billion during the next seven years.

By Ryan Clark | Updated on September 23, 2008

LONDON-Sovereign Wealth Funds are looking to invest in international commercial real estate during the next seven years, to the tune of $725 billion, according to a global report by CB Richard Ellis. A solid focus for the money is predicted to be stable markets such as Japan and the UK.

“Given that the real estate sector’s investment characteristics–current income combined with long-term appreciation–closely match SWF requirements,” said Ray Torto, chief global economist at CBRE, in a statement. “We expect them to increase their weighting of commercial property to approximately 7% of their total assets. With nearly $4 trillion of total assets currently under SWF control, a 7% allocation would mean worldwide commercial real estate investments totaling $280 billion. To put this number in context, the entire US institutional-grade property portfolio owned or managed by investment managers and plan sponsors is valued at approximately $330 billion today.”

Estimates show that the SWFs could reach total assets of $12 trillion by 2015, according to CBRE, which at 7% allocation implies SWFs would make approximately $725 billion of net property investments over the next seven years. According to CBRE, the target allocations can be achieved if the SWFs diversify future investments widely across geographies.

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