Investment in real estate assets could grow from its current 5-10 percent to 25 percent over the next decade, according to Jones Lang LaSalle.
Jones Lang LaSalle’s Real assets and the Asia Pacific report says defensive characteristics of real estate are becoming more widely appreciated.
According to the report, currently the top 30 global wealth funds by assets under management would have to increase allocation to real estate by 1.2 percent in order to acquire the 496 buildings, valued at $48.2 billion, that comprise the Sydney CBD.
Ben Hunter, Jones Lang LaSalle director – international investments, says there is a trend toward increased risk aversion by large investors, particularly sovereign funds and global pension funds, resulting in a move toward portfolios designed to achieve more stable risk-adjusted returns.
“We have already seen a number of sovereign wealth funds and pension funds re-rating property as an asset class, resulting in higher allocations to direct property within their portfolio,” Hunter says.
The Canadian Pension Plan Investment Board (CPPIB) has increased its allocation to real estate from 4.3 percent in March 2007, to 10.6 percent in March 2012.
Pramerica Real Estate Investors estimates the global real estate investment market will increase from US$26.56 trillion in 2011, to US$91.0 trillion in 2031.
According to the report, Pramerica says the Asia Pacific region will account for US$45 trillion in 2031, and 60 percent of global growth between 2011 and 2031.
View the Jones Lang LaSalle report