Sovereign wealth funds (SWFs) will own up to 20 percent of global real estate by 2015, new data from property adviser CB Richard Ellis (CBRE) showed on Sunday.
SWFs, the billion dollar state-backed investment vehicles which have bought major stakes in everything from investment banks to UK commercial property in the past few years, will increase their exposure to real estate from 4 to 7 percent over the next seven years, CBRE said.
This means they will have bought between 15 and 20 percent of total international property by 2015 - worth an estimated $725 billion - while increasing "competition for trophy assets’ in the US and UK," CBRE added
SWFs control between $2 to $3 trillion worth of assets worldwide. This is expected to grow to $12 trillion by 2012, according to the IMF (International Monetary Fund).
The rise in SWFs in the past couple of years from China and the oil-rich Middle East marks a shift in the balance of power in the world economy away from western countries to emerging markets.
Over the past two years SWFs have poured billions of dollars of much needed capital into big American investment banks reeling from writedowns due to the credit crisis.
China’s $200 billion sovereign wealth fund, China Investment Corporation, bought a 9.9 percent stake in Morgan Stanley last year for $5 billion.
SWFs have also favoured commercial real estate in London, attracted by solid long-term returns.
In May this year St Martins Property Group, the real estate arm of the Kuwait Investment Authority (KIA), paid $642 million for the Willis Building, a 491,000 sq ft City of London office tower, let to insurance broker Willis.