The value of commercial real estate stock held by investors hit a new record of USD13.6tn in 2014, according to the 41st annual Money into Property report just released by DTZ.

Of the three regions contributing to this 4% global increase, Asia Pacific benefitted from the strongest annual growth as stock grew 10% to USD5.1tn – led by China which rose 21% (in dollar terms). The growth of stock in China is so significant that, when excluded, Asia Pacific rose by just 1%.

North America’s stock grew 5% to USD 4.2tn and is now closing the gap on Europe, whose stock stood still at USD4.4tn. Although flat in dollar terms, Europe’s performance is masked by currency movements. In Euro terms European stock grew 2%. As a result, regional stock levels have now recovered from the downturn and stand above their previous peak in local currency terms.

Breaking down growth, equity continues to replace debt as a global source of capital. As a consequence, debt as a percentage of total stock declined further, falling to 55% compared with 56% the previous year.

Nigel Almond, Head of Capital Markets Research at DTZ, said: “The equity component of stock rose by 8% during 2014, driven by private equity, whereas debt was more muted and was up by just 2%.

As the market continues to de-lever, those markets with relatively lower leverage levels have benefitted from stronger growth, notably markets in Asia Pacific such as Australia, Hong Kong and Taiwan. Growth in more leveraged western markets such as the US and UK has been held back in comparison.”

Global investment volumes reached USD633bn by the end of 2014, a 20% increase on 2013. Growth was observed in all three regions, led by a 32% increase in Europe. The momentum has continued into 2015, with global volumes in the twelve months to end Q1 2015 reaching USD653bn.

Nigel Almond added: “With record levels of new capital targeting commercial real estate, global investment activity is set to reach USD771bn this year, just short of the USD791bn record in 2007. However, regionally we see volumes surpassing their peak in North America this year, and also in Europe (in Euro equivalents). In Asia Pacific, volumes will also remain close to their recent peak levels. We see the appetite for investment continuing into 2016 as real estate still looks attractive to other assets in the current low interest rate environment.”

DTZ also conducts an annual survey of investors, included within the Money into Property report. Close to two thirds (62%) of survey respondents highlighted the weight of capital as being a clear and present risk to the market. Deflation (14%) and a Chinese slowdown (11%) are smaller perceived risks. With markets now showing signs of becoming overheated, investors need to be aware of future risks.

Nigel Almond commented: “The weight of capital is driving a disconnect between pricing and fundamentals. Markets are at risk of an increase in interest rates which will see the relative attractiveness of real estate diminish. In turn this could stall new investment and reverse the flow of funds as investors seek to redeem their investment with consequent impact on pricing. Investors need to focus on fundamentals, and in our view good quality assets in gateway markets are less exposed to these risks.”