Private investors spent $338bn (£266.4bn) on global commercial real estate in 2023, according to the latest Knight Frank Wealth Report.
The amount equates to a 49% share of the total investment – the highest share on record.
Although total private investment in 2023 nearly halved on 2022 volumes, this was a smaller contraction than institutional and public investment, which both fell by 53%.
The living sector was the most targeted investment class by private buyers, found Knight Frank, followed by industrial and logistics, and offices.
For high-net-worth individuals, offices reclaimed its place as the top sector for investment as buyers capitalised on reduced competition to secure trophy assets.
Investors from France were the largest source of private cross-border capital in 2023, with $3.1bn invested.
Private French capital mainly targeted European assets, particularly in Germany, Spain, Italy and the UK.
Investors from the US dropped from pole position in 2022 to sixth in the top 10 sources of private cross-border capital in 2023, with investment falling by a whopping 72% year-on-year to $1.3bn.
Meanwhile, cross-border capital from Spain was the largest source of HNWI investment in 2023, targeting commercial real estate in the US, Ireland, the Netherlands and the UK.
Global commercial real estate investment fell by 46% to $698bn in 2023 as investors grappled with elevated interest rates and higher debt costs.
Much of the contraction in investment was due to a retrenchment among US investors, said Knight Frank, with outbound US investment falling by 52% year-on-year.
Industrial and logistics was the most invested sector for the first time on record with volumes reaching $174bn – one quarter of all global investment.
The share of investment into the office market fell from 25% in 2022 to 22% in 2023, with investment into the living sector contracting from 30% of the total to 24%.
Investors from the US, Canada and Singapore accounted for just under half of all cross-border global commercial real estate investment in 2023. However, of the top 10 global cross-border capital sources, the only investors to increase investment in 2023 were from the UAE (up by 349%) and Japan (up by 156%). Last year was a record one for Japanese capital with $8bn invested.
London was the top city destination for total cross-border investment in 2023, with $7.6bn invested.
For private investors, New York trumped London for the first time since 2016 as the number one target for their investment, while for HNWIs, Singapore, Berlin and Dublin were the most invested urban centres.
Antonia Haralambous, an associate in Knight Frank’s commercial research team, said: “With interest rates expected to remain elevated globally into the second half of 2024, we anticipate private capital to remain active. Indeed, during previous times of dislocation, private capital has typically rotated back into commercial real estate.
“Following the global financial crisis, the private buyer share of global commercial real estate investment grew from 30% to 38% and in 2021, following the first year of Covid-19, its share grew to 45% from 39% pre-pandemic.
“We expect this trend to continue in 2024: 19% of respondents in the Knight Frank Attitudes Survey were looking to invest directly in commercial real estate in 2024, with investors from the Middle East (23%) and Asia (21%) likely to be the most active.”
Image © Shutterstock
Send feedback to Samantha McClary
Follow Estates Gazette
