Global Real Estate Capital Flows H1 2022

• Real estate capital flows between Asia-Pacific (APAC), North America and Europe increased by 18% year-over-year to US$56.6 billion in H1 2022, the highest first-half total since 2018.  This growth was primarily driven by U.S. investors taking advantage of favorable dollar exchange rates to acquire European assets.
• European cross-regional capital inflows increased by 31% year-over-year to US$42 billion in H1. U.S. investors were particularly active in acquiring prime logistics and office assets across established European markets, while APAC investors largely targeted assets in London.
• Inflows to North America and APAC were subdued, largely due to significant reductions in capital outflows from Europe. European capital to North America fell by 34% and to APAC by 79% from the 2017-to-2021 H1 average. 
• The office sector attracted almost half of the global outbound capital across the three major regions, followed by industrial & logistics and multifamily. London attracted the most of any global city with US$9.8 billion, largely from Asian investors targeting prime office assets. Germany was heavily targeted by North American investors, with four cities attracting a total of US$5.2 billion.

Overview

Real estate capital flows between Asia-Pacific (APAC), North America and Europe increased by 18% year-over-year to US$56.6 billion in H1 2022—the highest first-half total since 2018 and a 12% increase from the H1 average between 2017 and 2021.

Europe was the prime beneficiary of cross-regional capital inflows, while having the lowest level of capital outflows. U.S. investors, who benefited from a strong dollar exchange rate, targeted centrally located office and industrial & logistics assets in the region, while APAC investors—free from travel restrictions—nearly doubled their European investment volume of a year ago.  

Cross-regional inflows

Cross-regional investment in North America totaled US$8.7 billion in H1 2022, the highest first-half total since the COVID pandemic. Capital inflow from Europe and APAC increased by 20% and 14%, respectively, compared with H1 2021, which had the lowest total inflow to North America since 2013. Despite the increase in cross-border capital to North America, foreign investors accounted for only 2% of the region’s total investment volume in H1—their lowest share on record. Total North American volume increased by 31% year-over-year in H1 as domestic investors significantly upped their activity. 

Cross-regional inflow to Europe totaled a record US$42 billion in H1 and accounted for one-fourth of the region’s US$172 billion in total investment volume—the highest share on record for foreign investors. U.S. investors accounted for 17% of the total, aided by a very favorable dollar exchange rate. Inflow from APAC doubled year-over-year, reaching nearly 90% of its pre-pandemic H1 average from 2016 to 2019. Investors heavily targeted prime office and logistic asset in major European markets.

Inflow to APAC fell by 27% year-over-year in H1 to US$5.7 billion, largely due to a nearly 80% drop from Europe. The majority of APAC inflow was from North American investors targeting office assets in Singapore, Tokyo and New Delhi.  

Cross-regional inflows by region

Cross-regional inflows by sector

Cross-regional capital inflow to the North American industrial and hotel sectors grew by 53% and 58% year-over-year, respectively, while inflow to the office sector grew slightly. However, due to a strong U.S. dollar and lingering effects of the pandemic, cross-regional inflows remained below pre-pandemic averages across all sectors. Foreign investors were most attracted to the U.S. industrial sector in H1.

Cross-regional capital inflow to the European office sector in H1 grew by 127% year-over-year and was 54% above the five-year pre-pandemic average. London’s office market had five transactions valued at more than US$500 million each, including the acquisition of 5 Broadgate by a South Korean pension fund for US$ 1.6 billion. The logistics sector also saw significant cross-border investment activity, particularly in France and the U.K. U.S. investors accounted for four of the five largest acquisitions of European logistics assets in H1.

APAC’s office market saw a 13% year-over-year increase in cross regional capital inflow in H1, very near the pre-pandemic H1 average between 2015 and 2019 and almost entirely driven by North American investors. Two acquisitions in Singapore made up one-quarter of all cross-regional inflow to the sector. Investment in all other sectors was down year-over-year but should tick up in coming years as European investors return and North American investors target new opportunities in the region.

Cross-regional inflows by sector

Source: CBRE Research 2022, Real Capital Analytics.

Cross-regional inflows by market

New York City remained the top North American market for cross-regional capital inflow in H1 with a total of US$1.5 billion, up by 64% from a year ago. South Korean and Israeli investors were the most active, primarily targeting office and multifamily assets. Seattle was the second most-preferred market with a total of US$900 million in cross-regional inflow, up by 804% from H1 2021. Overall, 16 U.S. cities received cross-regional inflows of more than US$100 million.

London attracted US$9.8 billion of cross-regional investment volume in H1, the most of any global market. Office investment, largely from South Korean and Singaporean investors, dominated deal flow in Europe. German cities also garnered significant cross-regional interest, with Hamburg, Berlin, Dusseldorf and Frankfurt all finishing in the top 10 most targeted markets. Berlin was the second most targeted market in Europe, followed by Dublin. Milan, Madrid and Paris also saw high levels of capital inflow.

In APAC, Singapore had US$1.2 billion in cross-regional inflow, double the amount of last year’s H1 total and the most since H1 2016. Foreign investors primarily targeted the office sector. The Tokyo office market had significant capital inflow from North American investors, while Canadian investors accounted for four office acquisitions in New Delhi totaling more than US$100 million each.

Cross-regional inflows by market

Source: CBRE Research 2022, Real Capital Analytics.

Cross-regional outflows

Global outflows from North America increased by 12% year-over-year in H1 to US$35.6 billion. Europe received a record high amount, as U.S. investors took advantage of favorable dollar exchange rates. North American capital to APAC decreased by 24% year-over-year in H1 but was 6% above the previous five-year average. North American outflows to the Middle East, South America and Africa were all down moderately year-over-year. Europe received 86% of all North American cross-regional outflow, the highest amount since the Great Financial Crisis.

Capital outflow from Europe fell by 12% year-over-year in H1 to US$4.1 billion, as more than 90% of the region’s total investment capital was deployed either domestically or in other European countries. Three-quarters of European capital was invested in the country in which it was raised, while 15% flowed to another European country. The U.S. office and industrial sectors garnered nearly all the limited cross-regional European outflow in H1.

APAC’s outflow surged by 67% year-over-year in H1 to US$13.5 billion. The region had the highest percentage of total investment capital deployed across regions at approximately 20%, compared with only 9% of North American and 3% of European capital. Approximately three-quarters of APAC outbound capital went to Europe.

Cross-regional outflows by region

Source: CBRE Research 2022, Real Capital Analytics.

Cross-regional outflows by sector

The office sector attracted 48% of global outbound capital in H1, followed by the industrial & logistics sector with 30% and the residential sector with 11%.

North American capital outflow was in line with the global average, with the office, industrial & logistics and residential sectors attracting 48%, 30% and 13% of total outflow, respectively.

European investors had the most evenly distributed cross-regional outflow across sectors, with office receiving 37%, industrial & logistics 22% and residential 20%. The hotel sector garnered 13% and the retail sector 8%.

APAC investors overwhelmingly preferred office assets, which attracted approximately 60% of the region’s total cross-regional outflow. Industrial assets attracted just under one-third, while hotels garnered 6%.

Cross-regional outflows by sector

Source: CBRE Research 2022, Real Capital Analytics.

Outflows by market

Twenty-one foreign markets received North American investment of more than US$200 million in H1, 14 of them in Europe. London received the most with US$3.9 billion, nearly doubling the amount in H1 2021. Four German cities—Hamburg, Berlin, Dusseldorf and Frankfurt—accounted for one-fifth of the North American outflow to Europe. In APAC, North American outflow to Singapore increased by 817% year-over-year in H1 to US$978 million, representing a 130% increase from the H1 2017-2021 average of US$424 million.

European cross-regional outflow was concentrated almost entirely in established North American markets, with just over half going to Seattle, New York, Los Angeles and Washington, D.C. Singapore was the only APAC market to receive a significant amount of capital from Europe at US$219 million.

APAC investors heavily targeted London, attracting US$5.7 billion or 40% of APAC’s cross-regional capital outflow in H1. Brussels attracted US$662 million, up 37% from the previous five-year H1 average. Six North American markets attracted more than US$200 million each from APAC investors, but total capital flows to North America remained below pre-pandemic levels.

Cross-regional outflows by market

Source: CBRE Research 2022, Real Capital Analytics.

Current trends indicate that cross-regional investment will remain strong in the near term. APAC and North American investors likely will remain particularly active, especially as pandemic-era travel restrictions have almost entirely been lifted. The euro slipped below parity with the U.S. dollar in early H2 2022, which should further attract U.S. investors. A return to pre-pandemic levels of investment originating from the Middle East would further bolster the global investment market.