Hot Global Real Estate Funds

Bloomberg reports the launching of two global real estate funds by investment banking giants Morgan Stanley and Goldman Sachs to the tune of $12 billion. Global real estate is hot; Private Equity Intelligence projects over 100 real estate funds will raise a record $69 billion this year. Tim Friedman at PEI speculates "A third of all funds being raised by Americans have some focus on Asia and everyone is looking to developing regions for deals that are more profitable.''

The focus on global real estate investment, particularly in developing Asian nations, indicates a shift away from investment in US and Europe where prices have been topping. One anomaly is Japan - the 2nd largest economy in the world never participated in the real estate boom. Morgan Stanley plans to spend almost half of its fund in Japan... a graph from a post last year illustrates the rise and fall of the Japanese real estate bubble. (In 2005, land prices rose for the first time in Japan in over 15 years).

Real estate has attained legitimacy as an investment based on its global track record of the past five years. Global investment makes sense because real estate valuation has become more standardized and comparable across borders. Its commoditization as a product is easily seen on a local level at real estate investment clubs that tout sight-unseen properties for sale in Alabama, Costa Rica and other places where low buy-in and investment appreciation are the ROI objectives.

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