The SPDR International Real Estate ETF had a record 117.8 million shares outstanding as of September 4 -– a proxy for fund flows since more shares are created to meet demand -– up from 400,000 shares when the fund was formed in December 2006. The ETF has gained 10.6 percent year to date versus 8.1 percent for the Standard & Poor’s 500 Index, the U.S. equity benchmark gauge.
Other big players in this space have also done well year to date, including the Vanguard Global ex-U.S. Real Estate Index Fund ETF Shares (VNQI), which is up 9.3 percent; and the SPDR Dow Jones Global Real Estate ETF (RWO), which has jumped 16.5 percent.
Also paving the way for more real estate deals are the early stages of a rebound in the commercial mortgage-backed securities market in Europe and new REIT legislation in India.
Some investors say the heightened liquidity is a warning sign. Hyper-liquidity in 2007 was a prelude to the real estate crash, as the flood of debt made available through the CMBS market encouraged borrowers to pay ever higher prices.
Additionally, overbuilding in China on the residential and commercial side have kept some investors wary of putting money in Chinese properties.
“Asia’s tough,” said Moore. “You think everybody should go there but that’s also where a lot of the construction is occurring. No sooner do you buy something than a new building competing for your tenants goes up.”
Real estate companies’ earnings are rising faster than interest rates and as long as that remains the case, demand and asset values will likely hold up, said State Street’s Mazza.
“If we get to a place where leverage because of the excess liquidity is increasing faster than revenue growth and earnings, that is a sign there is some overheating,” he said. “We don’t see that at present.”