CBRE Capital Forecast: Caution This Year, Some Recovery Next Year

Richard Barkham, Global Chief Economist & Head of Global and Americas Research, CBRE. Image courtesy of CBRE

Global cross-regional capital flows among North America, Europe and Asia-Pacific came to a total of $30.5 billion in the first half of this year, which was a whopping 52 percent lower than in the first half of 2022, according to CBRE’s just-released H1 2023 Global Real Estate Capital Flows report.

CBRE attributes this drop in global investment to high interest rates, softer CRE fundamentals and mismatched pricing expectations between buyers and sellers.

Cross-regional investment specifically in North America, however, increased by 5 percent year-over-year, driven primarily by two large acquisitions in the U.S. by Asian investors.

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Globally, the assets most in demand were in the industrial/logistics sector, accounting for 37 percent of all global cross-regional investment in the first half of 2023. CBRE reports that this was the highest half-year share of any asset type on record. A strong supply-and-demand situation is the main factor.

Global investors will likely remain cautious for the rest of this year due to high interest rates and economic uncertainty, Richard Barkham, CBRE’s global chief economist, commented in a prepared statement. However, since inflation seems to have peaked globally, and central banks are either at or near the end of their rate-hiking cycles, CBRE anticipates the global investment market to begin recovering in the first half of 2024, Barkham added.

A closer look

Cross-regional capital flow into North America totaled $11.8 billion in the first half of the year, leading to the aforementioned 5 percent increase from 12 months earlier. “Investment was fueled by a resurgence in APAC-originating capital, predominately from Singapore and, to a lesser extent, Japan,” CBRE noted.

The two outsized deals in the U.S. that accounted for the bulk of cross-regional investment volume were GIC’s share of the $14 billion buyout, in partnership with Oak Street Real Estate Capital, of STORE Capital REIT, and a large New York City office acquisition by Japanese investors.

After industrial/logistics assets, retail properties were the second-most desirable, attracting $3.6 billion in investment. The retail sector was attractive vis-a-vis other property types in part because of going into the repricing cycle at higher cap rates.

The office sector did not have a good showing: This product type “saw its lowest half-year cross-regional investment volume since 2010 as uncertainty around future occupier demand continued,” CBRE said.

Consistent with CBRE’s 2023 U.S. Investors Intentions Survey, New York, Los Angeles, Dallas, Miami and Charlotte, N.C., were again in the top 10 most sought-after markets by international investors who, CBRE says, “have a clear preference for Sun Belt markets.”