Despite the challenging economic and geopolitical landscape of 2022, private investors have remained active in the global commercial real estate market. In fact, private buyers accounted for 41% of the total investment, amounting to a staggering $455 billion, according to RCA. This represents the highest share of private investment in commercial real estate on record, surpassing institutional investment for the first time. While institutional investment declined by 28% compared to 2021, it still remained 2% above the 10-year average.
Commercial real estate investment - who is investing capital and where?
Although private investment in 2022 decreased slightly from its peak in 2021, it was still the second strongest year in history, sitting at an impressive 62% above the 10-year average.
Investment Sectors of Choice
The sectors that attracted the most interest from investors were multifamily residential (also known as the private rented sector or PRS), offices, and industrial assets. According to the Attitudes Survey, 43% of respondents were already invested in offices, while 40% had investments in industrial assets. Ownership in retail, life sciences, healthcare, PRS, data centers, and education real estate also saw an increase in 2022 compared to the previous year.
Commercial real estate investment - who is investing capital and where?
Top Destinations for Capital
The United States, United Kingdom, Germany, Canada, and France emerged as the top destinations for private capital in 2022. Interestingly, only the UK and France experienced year-on-year increases in total private investment. The UK saw a 1% increase to $14.6 billion, while France experienced a significant jump of 21% to $12.2 billion, thanks to its resilient economy and relatively low inflation levels compared to the rest of Europe.
Commercial real estate investment - who is investing capital and where?
Driving Investment Decisions
Inflation is set to play a significant role in investment decisions in 2023. According to our HNW Pulse Survey, 80% of respondents stated that inflation would significantly or to some extent influence their investment decisions. To navigate the higher inflationary environment, investors are likely to shift towards commercial real estate, which offers strong growth potential, particularly in assets with indexation. However, there are indications that inflation may have already peaked in most major economies, and its influence on investment choices may start to moderate as the year progresses.
Private buyers continued to target US cities in 2022, with US metropolises accounting for 67% of the total volume of private capital investment. Paris was the only non-US city to feature in the top 10.
Commercial real estate investment - who is investing capital and where?
While London ranked eleventh overall for total private investment (cross-border and domestic) in 2022, it claimed the top spot for cross-border private capital with $2.5 billion. This accounted for 44% of the total private investment into the city and 15% of total global cross-border private investment into cities.
Private investors from the US were the largest source of capital in 2022, with $302 billion invested, representing over a quarter of total commercial real estate investment and 66% of private investment. However, US private investment decreased by 3% compared to the previous year. Investors from France and the Chinese mainland were the only buyers among the top 10 sources of private capital to increase their investments in 2022, with a rise of 27% and 25% respectively.
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