Property funds have a significant amount of dry powder, much of which was committed in the years following the Covid-19 pandemic, when ultra-low interest rates supported a boom in real estate markets. This is true across the wider investment landscape. In the US alone, institutions have around US$3.6 trillion saved in low-risk money market funds according to Macrobond.

The opportunity cost of holding cash can be significant when markets turn, according to the international real estate advisor. While investors have enjoyed a healthy return on cash – with US money market funds delivering a total return of 5.5% since US policy rates peaked in July last year – those who redeployed into US equities have enjoyed returns in excess of 20%, largely due to an AI-inspired equity bull market, based on S&P data.

Rasheed Hassan, Head of global cross border investment at Savills, comments: “Institutional investors, who are the principal source of capital, are showing no signs of turning away from real estate. Allocations have instead stabilised in recent years – and this should create activity in the market as pent-up supply is released. Ongoing structural shifts in the global economy will continue to increase the deposits in to the major institutions backing real estate, such as pension funds and sovereign wealth, even if allocations remain stable.”

Savills says that the principal driver of this trend will be the global ageing population. UN figures suggest nearly 25% of the population is now over 50 – up from 16.6% in 1990 – and that this figure will reach one-third by 2050. People generally borrow and spend when young, save and invest when middle-aged, and divest and spend in senior years. A growing middle-aged population saving for retirement supports global savings and wealth accumulation. 

Oliver Salmon, Savills World Research Director, Global Capital Markets, says: “Investor sentiment surveys show more optimism, underpinned by growing evidence that property values are bottoming out. The macroeconomic backdrop is also improving; central banks are beginning to ease monetary policy, amid a broad-based decline in global inflationary pressures, and economic growth is accelerating.”