Top Global Investors Stuck to Safe Asset Classes in 2021

Global investors poured capital into commercial real estate in droves in 2021, though “it was not exactly a risk-on type of trend in acquisitions,” Real Capital Analytics’ Jim Costello notes in a new analysis.  

“Much of this capital was deployed to the asset types viewed as safer in the face of elements of economic uncertainty,” he says. “Some elements of this uncertainty are growing into 2022, but it is unclear how the current environment will impact this momentum of capital.”

Investors focused their energy on what Costello deems “targeted plays on unique assets where income and expense structures were sheltered” last year—and in 2022, it may well be that they turn their focus to assets resistant to inflationary pressures. But “what is unclear is if each property sector can provide such protection broadly or if such safety is only seen in targeted plays,” he says.

Collectively, the top 100 global investors were more active buyers than the overall market, purchasing 83% more than they did the year prior. Costello says that on a net basis, those top investors bought more than they sold and added nearly $180 billion in assets to their portfolios collectively in 2021.

Those investors were also overwhelmingly focused on the apartment and industrial sectors which accounted for 82% of their net investment last year. 

“This overweighting to industrial and apartment is nothing new: these two sectors accounted for 78% of the net acquisition of these investors in 2020,” Costello says. “Still, that overweighting in 2020 occurred in a period when the net investment in hotels and offices was falling relative to a year earlier.”

The top investors also re-entered the hotel and office sectors after a tepid 2020, with acquisitions “targeted on plays more resistant to the demand challenges presented in the Covid era,” he says.  

“Hotel purchases were more weighted towards automobile-focused properties and vacation-type destinations, and less focused on the big business hotels that struggled as people could not congregate at conferences,” Costello observes. “The growth in investment for the office sector was aided by growing investor interest in life sciences assets which are naturally resistant to remote work challenges.”

Conversely, the RCA analysis notes that net investment in retail properties plummeted from $2.5 billion in 2020 to hit a net deficit of $4.5 billion in 2021, fueled by e-commerce and inflationary concerns.