More than half of the $600 billion global REIT market is composed of non-U.S. real estate securities. That total is expected to balloon to $1 trillion by 2010, with only 30% U.S REITs, said J.D. Sitton, vice president and client portfolio manager for REITs at JPMorgan Asset Management, New York.
Since 2000, there's been a tremendous growth in the global REIT market, said Joe Azelby, managing director and global head of JPMorgan Asset Management's real estate business.
At the same time, 2005 was the first time there was a net shrinkage in the U.S. REIT market as more public REITs were taken private, Mr. Azelby said. "We expect more privatization of public REITs next year," he said.
Institutional investors with fully committed real estate allocations are moving or considering moving assets from domestic to global real estate and real estate securities. Those with room in their allocations already are investing in global vehicles.
Executives at the $11.5 billion Kansas Public Employees Retirement System, Topeka, are looking into global real estate securities; the system has invested in domestic REITs since 1997, said Robert Schau, real estate investment officer.
Speaking at the Pension Real Estate Association's spring conference in San Francisco earlier this month, Mr. Schau said U.S. investors have been reluctant to invest internationally until recently.
"The pendulum tends to overswing," he said. Already, a lot of capital is moving into foreign real estate, reducing expected returns, Mr. Schau noted.