Posted on June 07, 2018

IPE Real Assets have recently listed the 100 largest institutional real estate investors in the world by rank. Below we have highlighted the top ten in terms of real estate assets-under-management (AUM) in dollar terms alongside their country of origin and proportion of total AUM that real estate represents.

The list below highlights the diversity of the world’s largest real estate investors today. The list is dominated by various European and North American pension fund managers which make up just under 45% of the top ten real estate AUM followed by insurance companies in Europe (29.5%) and two sovereign wealth funds from the Middle East (25.9%). Not only have large institutional real estate investors become more ‘global’ in origin, they are investing more ‘globally’, as can been seen by the amount of cross-border investment in the chart below. Institutional investors have also been increasing their portfolio allocation to alternative investments including real estate. Real estate assets have helped provide a steady and diversified income stream to institutional portfolios as well as providing yield in the context of a low interest rate environment. 

The full list compiled by IPE Real Estate of the top 100 real estate investors also highlights the arrival of new players mainly from the Middle East, Singapore, South Korea and China among the top twenty. SWFs from the Middle East have helped diversify their economies away from oil and invest in a wide range of non-oil related assets. Emerging market institutional investors have become more prominent real estate investors in the global arena in recent years helped by a growing middle class (and wealth) in large swathes of the emerging world. Other demographic changes such as rapid urbanisation has led to an increased demand for housing and an ageing population are also contributors. 

The 10 largest real estate 2 [].jpgGlobal institutional real estate investments have been centred on a limited number of established ‘gateway’ cities (New York, Tokyo, London, Paris, Hong Kong and Singapore) according to Jones Lang LaSalle. Additionally, according to IPE Real Estate, the investors in their ‘Top 100 Institutional Investors in Real Estate’ list continue to prefer European markets followed by North America. In spite of the search for yield, market transparency and stability remains a key factor as well as low barriers to entry for real estate investors, according to Jones Lang LaSalle. Thanks to the development of the real estate investment trusts (REITs) market globally, which necessitates the requirement for professional management, public disclosure and governance, market transparency is improving in many parts of the world. Germany, for example, is a country whose real estate market improved tremendously in terms of transparency partly thanks to the development of REITs and due to increased liquidity and international investors. 

For the moment, the majority of investments are in a limited amount of mature markets but they have limited room for growth due to already low yields and slowing rental growth prospects overall. As global wealth rises, the size of the institutional real estate investment world will become larger and with this will come more institutional grade buildings being built around the world, even in markets outside current established ‘gateway cities’. IPE Real Estate do point out, however, that the rate of increase and expansion of the investment grade universe and cross-border investment is likely to be determined by political and macroeconomic conditions.