Global Capital Flows H2 2021

Inflows by Region

H2 2021 North American inflows totaling US$27.3 billion were at their highest level since H2 2016 and represented a 50% increase over the five-year H2 average between 2016 and 2020. The increase was fueled by Singapore-based investors targeting industrial & logistics assets in the region. Overall APAC inflows to North America surged to their second highest H2 level on record. Additionally, European and Middle Eastern capital inflows to North America returned to pre-pandemic levels after essentially grinding to a halt in H1 2021.

European inflows increased by 41% year-over-year in H2 to US$41 billion but remained 4% lower than the H2 average between 2016 and 2020. North American investment accounted for nearly 70% of total inflows to Europe. U.S. investors primarily sought U.K. industrial & logistics assets, as well as prime office assets across major European markets. Singaporean and Canadian investors were quite active in the European residential market and accounted for 12% and 7% of inflows to the region, respectively. APAC and Middle Eastern investment in Europe have not fully returned to pre-pandemic levels, although there was a year-over-year increase from both.

H2 2021 APAC inflows totaling US$9.6 billion were at their highest level in the past decade, largely driven by North American investors targeting the Australian industrial & logistics and office sectors. Singapore and Hong Kong also had significant deal flow from North American investors. However, APAC inflows represent only 12% of total cross-regional volume. APAC inflows are expected to increase in coming years, as investors seek higher yield and new investment opportunities.

Cross-regional Inflows by Region

Source: CBRE Research 2022, Real Capital Analytics.

Inflows by Sector

Across all regions, 45% of cross-regional global capital targeted the industrial & logistics sector. Singaporean investors accounted for more than 75% of cross-regional inflows targeting the sector. In North America, H2 2021 inflows targeting industrial & logistics assets totaled US$14 billion—the highest half-year amount for any sector since office in H1 2016. Residential sector inflows totaling US$4.5 billion were the highest on record for any half year, with two acquisitions totaling more than US$250 million by U.K. and South Korean investors. Office inflows saw a modest year-over-year increase in H2 2021 to US$7.5 billion but remain 22% below the pre-pandemic H2 average between 2015 and 2019.

In Europe, the industrial & logistics sectors posted an all-time H2 high of more than US$14 billion in cross-regional investment, nearly 50% above the previous record in H2 2020. While Europe’s residential sector was the second most targeted for total investment (both foreign and domestic), it was the third most targeted by foreign investors alone. This gap is expected to narrow in coming years as foreign investors seek exposure to the growing European multifamily market. Hotels also made a modest recovery, although cross regional deal flow was heavily concentrated in the U.K. and Spain, which garnered 80% of the US$2.7 billion in overall H2 2021 European-targeted cross-regional investment.

Industrial & logistics assets also were the most targeted in APAC, with a record H2 total of US$5.5 billion—150% above the half-year average between 2016 and 2020. Meanwhile, capital flows to the office sector totaled US$4.7 billion, marking a return to pre-pandemic H2 levels. The hotel sector also made a strong recovery, registering US$857 million in cross-regional capital inflows—slightly lower than the all-time high in H2 2019. Cross-regional retail capital flows still have not fully recovered, while the residential sector saw limited cross-regional activity.

Cross-regional Inflows by Sector

Source: CBRE Research 2022, Real Capital Analytics.

Inflows by Market

Boston received US$1.8 billion in cross-regional inflows in H2, a 300% year-over-year increase that was the highest rate of all major North American markets. New York City had the highest total volume of H2 inflows at just over US$3 billion. Chicago and Los Angeles were next most sought-after destinations in the region, with notable deal flow across all major real estate sectors, largely from French, German and Singaporean investors. Twenty North American markets each received cross-regional inflows totaling more than US$200 million.

The U.K. was the most attractive European destination for cross-regional capital in H2 2021, attracting more than US$5.3 billion—the highest of any global market and more than the next three largest markets combined. Manchester and Birmingham also saw strong year-over-year growth, fueled by U.S. investors targeting industrial & logistics assets. Elsewhere in Europe, Milan saw one mega-deal in the retail sector valued at just under US$1 billion. German cities, notably Berlin and Munich, attracted many North American investors across a broad range of assets. Paris had US$1.4 billion in cross-regional H2 inflows, the fourth highest total behind London, Berlin and Milan.

Australia remained the most sought-after APAC country for cross-regional investors. Melbourne and Sydney saw significant deal flow. Singapore led all Asian markets in cross-regional inflows, buoyed by a US$950 million deal in the office sector.

Cross-regional Inflows by Market

Source: CBRE Research 2022, Real Capital Analytics.

Outflows by Region

H2 2021 North American outflows totaling US$40 billion were more than all other regions combined. The nearly US$9 billion to the APAC region was at an all-time high, while the US$31 billion to Europe was a return to pre-pandemic levels. Europe remains by far the biggest recipient of North American capital, receiving just under 80% of total outbound investment originating from the region.

European investment capital remained predominately intraregional (95%). Outflows to other regions totaled just US$7.2 billion in H2 2021, down by 22% from the half-year average between 2016 and 2020. European investors increasingly targeted industrial & logistics and office assets across several major North American cities.

In APAC, H2 2021 outflows increased by 112% year-over-year to US$26 billion—the highest H2 total since 2016. Deal flow from the region was primarily led by Singaporean investors. APAC was the only region with outflows to South America, totaling more than US$500 million.

Cross-regional Outflows by Region

Source: CBRE Research 2022, Real Capital Analytics.

Outflows by Sector

The industrial & logistics sector attracted 45% of H2 2021 global outbound capital, followed by the office sector with 34%.

North American capital outflows were almost equally split between industrial & logistics and office assets. The office sector attracted 42% of European outflows, compared with 34% and 29% of North American and APAC outflows, respectively. Industrial & logistics assets attracted 56% of APAC outflows, compared with 37% and 22% from North America and Europe, respectively.

Cross-regional Outflows by Sector

Source: CBRE Research 2022, Real Capital Analytics.

Outflows by Market

North American investors contributed more than US$200 million to each of 16 European and nine APAC markets in H2 2021. Notable transactions included a major retail acquisition in Milan valued at just under US$1 billion. Among other major European markets, outflows to Berlin and Amsterdam returned to pre-pandemic half-year levels in H2. Outflows to London were at their highest H2 level since 2018 and grew by 43% relative to the pre-Brexit average between 2015 and 2019. Among APAC markets, Sydney, Melbourne, Hong Kong and Singapore attracted significant North American capital.

Nearly 90% of European outbound capital went to North America in H2 2021, led by New York, Boston and Los Angeles. European investment in Boston and Los Angeles increased by 118% and 80%, respectively, relative to the pre-pandemic H2 average between 2016 and 2019. Remaining European outflows largely targeted Australian markets, primarily Melbourne and Sydney.

APAC investors almost exclusively targeted North American markets. London was the only non-U.S. market in the region’s top 10 most pursued destinations. APAC outflows to New York totaled nearly US$2 billion in H2, up from only US$150 million in H2 2020. APAC outflows to Chicago and Boston, the next two most sought-after North American markets, totaled nearly US$1.1 billion and US$980 million, respectively.

Cross-regional Outflows by Market

Source: CBRE Research 2022, Real Capital Analytics.

Robust global cross-regional capital flows to APAC, North America and Europe totaling a record US$77.5 billion in H2 helped to catalyze a surge in global investment volume in 2021. This was in sharp contrast with H2 2020, when cross-regional capital flows bottomed out due to COVID-driven market uncertainty and travel restrictions.

Travel restrictions have eased in most regions and pandemic-related market uncertainty is waning. 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.