Cross-regional flows between North America, Europe and Asia-Pacific totaled $30.5 billion in the first half of 2023, representing a year-over-year decrease of 52%, according to CBRE’s Global Real Estate Capital Flows H1 2023 Report. The fundamentals driving the decline are well known: increased interest rates, softer real estate fundamentals and different pricing expectations between buyer and seller. Additionally, CBRE analysts noted that less North American capital flow to Europe could be attributed to high interest rates, economic uncertainty and constrained debt markets.
Overall European capital inflows dropped by two thirds from the previous year’s total of $45.9 billion ending at $14.7 billion in H1 2023; “(This) is notable because the region is typically largest recipient of cross regional investment by a wide margin” commented CBRE analysts . International capital inflows into Asia Pacific (APAC) decreased approximately one third from 2022’s figure ($6billion) down to 4$06billion for this period with Japan receiving “relatively strong volume from North America due positive carry more favorable exchange rate & lower finance costs”.
North American cross regional investments however increased 5% YoY totaling 11$75bn driven mainly by Singapore based GIC buyout STORE Capital REIT ($14bn ) & Japan Mori Trust Co Ltd deal SL Green acquiring 49% stake 245 Park Avenue NYC($2bn). Major targeted markets were New York , Los Angeles , Dallas & Charlotte while Canada saw its highest ever half yearly total reaching 2$2 bn with majority coming form Singapore targeting Calgary Montreal & Toronto .
Industrial properties were favored amongst global investors resulting in 10$8 bn worth transactions accounting for 37 % share out off all cross border investments during this period with 303 million coming specifically form Singapore into US industrial/logistics sector . Retail sector witnessed an increase off20 % YoY largely due GIC buyout STORE Capital REIT but future cap rate expansion expected being less than other sectors hence limiting near mid term growth beyond pre pandemic levels Multifamily experienced 40 % drop YOY yet investor demand remains high given housing affordability issues increasing household formation plus decreasing new developments Office Sector declined 80% YOY mainly contributed too Europe though analyst point towards strong office fundamental there while Cross Regional Investments into NA office limited during 1st Half whilst APAC fell 69%.
