GLOBAL - Pension funds and other institutional investors could plough more than $200bn into worldwide property markets over the next five years, Invesco Real Estate has predicted.
Despite the massive estimate, Invesco Real Estate director of European research Simon Mallinson also warned the growing popularity of defined contribution schemes in place of defined benefit funds could limit the flow of capital into the market.
Speaking at the Investment Property Databank (IPD) Multinational Investment Seminar in London this week, Mallinson said the direct real estate industry currently lacks the type of fund structures which can invest capital from DC schemes and offer the required liquidity.
Invesco devised its global institutional capital flows estimates based on analysis of current institutional real estate holdings together with target allocations across North America, Europe and Asia.
Mallinson said: "We have estimated a conservative figure of $200bn in unleveraged capital could be invested in global markets over next five years by institutions.
"This is the starting point for us to work out the impact of such a scale of fresh capital hitting the market, chasing product which will create varying supply and demand issues across world markets."
CBRE director Michael Haddock told delegates that investment should be considered on a scoring matrix based on demand, supply, pricing and market risk.
"A rationale response to uncertainty in choosing investment destinations, is to look at those markets that score well on factors you are confident about and the things you are unconfident about don't matter, he said"
Haddock pointed to four markets which each had attractive property fundamentals over the short-term: Australia and Canada, which both have resource-based economies with tight supply, and Poland and France.
"Poland was one of few euro countries to avoid recession, has very good supply side metrics and tight development over next few years, while in France the supply side for Paris offices is also particularly tight," said Haddock.
The top stories this week were the High Court's decision to block the £12bn annuity transfer from Prudential to Rothesay Life, and a separate court ruling that 'raises the bar' for pension rectification exercises.
Guaranteed minimum pension (GMP) equalisation has soared to the top of pension schemes' to-do lists, with 58% stating it is a priority project, research from Equiniti has revealed.
Professional Pensions is holding its defined contribution (DC) conference on 4 September.