ABOUT 84 Asia-Pacific real estate funds are set to expire between 2013 and 2016, with the peak termination of 50 funds, worth US$40 billion in gross asset value, expected between 2015-2016.
According to CBRE's latest report, The Great Wave of Fund Expiration, the market will only be able to absorb around 75 per cent of the liquidity created by the disposals of closed-end funds scheduled to expire in 2015 and 2016.
The shortfall between the potential liquidity of funds ending their lifespan and the market's ability to absorb these assets will be around US$10 billion in the coming two years, it estimates.
A review of the assets available for disposal by real estate funds entering the termination phase shows that around 65 per cent are in China, Japan and Australia.
However, CBRE believes that the wave of potential disposals by funds will not exert a significant shock to the regional real estate market.
Fund activities from 2005-2008 created a high water mark for capital raising and investment, with CBRE data showing that about US$91 billion of capital was raised by private real estate funds in the region during the period. That was almost triple the US$32 billion raised in the following four years, 2009-2012.
CBRE noted that these funds were primarily focused in the opportunistic risk segment and showed a strong preference for assets in major markets in the Asia-Pacific region, in particular Australia, Japan and China - assets that with the onset of the Global Financial Crisis (GFC) saw significant loss in value. Capital values later rebounded but remain below pre-GFC levels in a number of markets.
CBRE said the liquidity absorption depends on various factors, such as ongoing investment sentiment, the fund-raising environment and the participation of institutional investors. Successful disposals also depend on the location and quality of the portfolios.