INTRODUCTION Contributed by: John Sullivan and Matt Alshouse, DLA Piper LLP
DLA Piper LLP 33 Arch Street, 26th Floor Boston MA 02110-1447 444 West Lake Street, Suite 900
Chicago IL 60606 USA
Tel: +1 617 406 6029 Fax: +1 617 406 6129 Email: john.sullivan@dlapiper.com
matthew.alshouse@dlapiper.com
Web: www.dlapiper.com
Overview: Despite Recent Turbulence, Real Estate’s Place as a Global Asset Class is Secure Despite recent challenges, real estate remains an important asset class for global investment. With a global value estimated by real estate company Savills to be USD326.5 trillion, real estate is the world’s largest store of wealth, more valuable than all global equities and debt securi - ties combined, and almost four times the size of global GDP. By comparison, the value of all gold ever mined is USD12.1 trillion, just 4% of the value of global property, and less than half of just the agricultural portion of the real estate market. Despite recent market turbulence, the private real estate publication PERE recently reported that private equity fund allocations to real estate were on the upswing in the second half of 2023, and a January, 2024 survey of Euro - pean fund managers and investment analysts by TIME Investments indicated that just over three quarters of investors planned to increase real estate allocations in the foreseeable future. A 2023 Investment Intentions Survey by the Pension Real Estate Association shows that
institutional investor portfolios have an average 10.2% allocation to real estate. The asset class clearly remains an important investment target for global investors. 2023 global trends and results Over the last several years, central bankers have raised interest rates aggressively in order to combat post-pandemic inflation. In the United States, the Federal Reserve raised interest rates 11 times between March 2022 and July 2023, with rates hitting a 23-year high in July of last year. At its March 2024 meeting, the Bank of England decided to maintain the Bank Rate at 5.25%, its highest level since 2008, as policy - makers awaited clearer signals indicating that the country’s persistent inflationary pressures had subsided. And during its April 2024 meet - ing, the European Central Bank maintained inter - est rates at record-high levels for a fifth con - secutive time. Because commercial real estate investors typically employ debt when acquiring real estate, this large increase in the cost of debt means that investors need lower prices in order to achieve their desired returns. Many owners,
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