The top 100 real estate companies worldwide expanded their asset bases by an additional US$400 billion in 2015, up 11% to US$3.6 trillion, according to British journal Estates Gazette.
In simpler terms, these companies collectively own properties that are nearly seven times more than the overall value of all commercial real estate assets in Australian worth A$700 billion based on CoreLogic RP Data figures.
So why are real estate investments that attractive?
Real estate investment trusts, or REITs, are an example of investment vehicles that provide ordinary individuals with the chance to hold interests or stakes in commercial properties.
These assets generally comprise income-generating properties such as shopping malls, hotels, offices and multifamily buildings among others. In the U.S., more than 70 million people invest in REITs through their retirement savings and other mutual funds.
By owning a stake in a certain REIT, investors are able to take a share of the assets’ profits in the form of distributions or dividends.
REITs are just one example of why real estate investments continue to be popular among those that seek viable commercial property returns, says sentinelpg.com.au. After all, most businesses would need real estate for their operations, hence the type of investment risk is somewhat mitigated and in some cases, drive the economy upwards like in China.
Land Down Under
Jones Lang LaSalle, or JLL, listed Sydney as the fourth most preferred investment destination among 20 cities around the globe. The real estate agency noted that foreign investors’ interest in Australia represented over 40% of all commercial property deals nationwide in 2015.
Michael Fenton, JLL managing director for New South Wales, said the technology industry in Sydney serves as one factor that lure property investors to dabble in the city’s real estate market.
Unsurprisingly, institutional investors have flocked into major real estate investment destinations not just in Australia, but worldwide in an effort to diversify their portfolio, hedge against risk and secure good investment yields.