Global Cross-Regional Capital Flows Hit New Heights

Global cross-regional capital flowed into the Asia-Pacific, North American and European regions with renewed vigor last year, with a record $77.5 billion invested in the second half of 2021. 

That’s a 60% year-over-year jump and stands in sharp contrast to the volume recorded in the second half of 2020, when cross-regional capital flows essentially “bottomed out,” according to a report from CBRE’s capital markets group.

“Travel restrictions have eased in most regions and pandemic-related market uncertainty is waning,” CBRE researchers write in their analysis. “APAC and North American investors are expected to remain very active outside their home regions in 2022, while the recovery of outflows from Europe and the Middle East likely will continue.”

Globally, about 45% of investment volume was focused on industrial and logistics, followed by office at 34%.  Interest in retail and residential remained comparatively muted, CBRE said.

But in North America, which accounted for almost three-fifths of total global cross-regional investment (with 80% to Europe and 20% to APAC), most investors targeted industrial and logistics and residential assets.

Europe was the biggest recipient of foreign inbound investment and was the smallest contributor to cross-regional outflows, while North America led global cross-regional outflows and was the second largest recipient of foreign inflows.

Capital inflows and outflows to APAC were also at recent highs, with inflows to the region hitting the highest level observed in a decade and outflows marking a five-year high. CBRE said the increase in outbound activity was led by Singaporean investors targeting US industrial and logistics assets, while inflows were led by interest in Australia’s industrial and office sectors.

“Despite market turbulence due to the COVID pandemic, certain cross-regional investment trends remained intact,” the report notes. “APAC investors were the most aggressive relative to their market size, registering the largest amount of outflows versus inflows across all major regions.”

London was the top target for cross-regional investment globally at $5.3 billion in H2 2021, followed by New York (the leading North American destination for overseas capital) at $3 billion. Sydney was the most targeted APAC market, attracting $2.3 billion in investment.

One point worth noting: while direct foreign investment is easily measured, “we cannot track indirect foreign investment, where an international capital source puts money into a US fund or goes through another intermediary to buy US real estate,” Marcus & Millichap’s John Chang said recently. According to Chang, foreign investment comprises just 10.3% of the total CRE dollar volume on average.