Commercial Real Estate News
Global Cross Border Commercial Property Capital Flows Implode 52 Percent Annually in 2023
According to a new report by CBRE, global cross-regional capital flows totaled $30.5 billion in H1 2023, down by 52% from H1 2022 and the second consecutive half-year period with an approximate 50% decrease in volume.
Much of this decline in cross-regional activity was due to less North American capital flow to Europe amid high interest rates, constrained debt markets and economic uncertainty. Europe saw inflows decline by two-thirds year-over-year, which is notable because the region is the largest recipient of cross-regional investment by a wide margin.
Global Chief Economist for CBRE Richard Barkham says, "Global investors likely will remain cautious for the rest of this year due to high interest rates and economic uncertainty. Nevertheless, it appears that inflation has peaked globally and central banks are either at or near the end of their rate-hiking cycles. Therefore, we expect the global investment market to begin recovering in the first half of 2024."
Cross-regional investment to North America increased by 5% year-over-year as Singaporean and Japanese investors made two major acquisitions and accounted for half of total cross-regional inflows to the region. Singapore-based GIC's share of the $14 billion buyout of real estate investment trust STORE Capital in partnership with Chicago-based Oak Street Real Estate Capital boosted North American inflows in H1 2023, along with a large New York City office sector acquisition by Japanese investors.
Cross-regional capital inflows to Asia-Pacific (APAC) decreased by approximately one-third year-over-year. Investment was evenly distributed among industrial & logistics, multifamily and office assets. However, cross-regional investment in office assets fell by two-thirds year-over-year. Japan received relatively strong volume from North America due to favorable exchange rates, lower cost of finance and positive carry.
Industrial & logistics assets were the most targeted globally, accounting for 37% of all cross-regional investment volume in H1 2023--the highest half-year share on record. Tight supply-and-demand dynamics, especially in major cities, made this sector particularly attractive.
The retail sector accounted for approximately one-fifth of all cross-regional investment volume amid strong consumer fundamentals and limited new supply. Cross-regional investment in the office sector hit its lowest half-year amount since 2011, while inflows to the multifamily sector decreased substantially year-over-year to just under $4.8 billion, although its share of total volume remained the same, says CBRE.
CBRE Report Summary Includes:
- Cross-regional capital flows between North America, Europe and Asia-Pacific totaled $30.5 billion in H1 2023, down by 52% from H1 2022.
- Elevated interest rates, softer real estate fundamentals and a mismatch in pricing expectations of buyers and sellers limited global investment.
- Cross-regional capital flow to Europe from the U.S. fell substantially in H1 2023, causing Europe's total global cross-regional capital inflow to fall by 68% from H1 2022.
- Cross-regional investment in North America increased by 5% year-over-year, primarily driven by two large acquisitions by Asian investors.
- Industrial & logistics were the most sought-after assets globally due to their strong supply-and-demand dynamics. They accounted for 37% of all global cross-regional investment in H1 2023, the highest half-year share of any asset type on record.
- CBRE expects cross-regional investment volumes to remain subdued for the rest of 2023 before recovering in 2024.
