Richard Barkham, global chief economist, head of global research and head of Americas research at CBRE, was a guest on the latest episode of the REIT Report podcast.
Barkham discussed the state of global cross-border real estate capital flows, which totaled $30.5 billion in the first half of this year. That marked a 52% decline from the same period a year earlier and down 44% compared to an average of the first half periods between 2018 to 2022.
Despite being a “pretty weak year really,” the mood of the global real estate investor is “far from despondent,” Barkham said. The mood is “wary and cautious until we get a much clearer signal on the glide path for interest rates, both in the United States and in the global economy.”
Notable trends during the first half included an inflow of funds into the U.S. from Singapore and Japan, reflecting the buyout of STORE Capital Corp. by sovereign wealth fund GIC and a $1 billion Japanese investment into New York City office.
Meanwhile, U.S. investors reduced their investment in European real estate during the first half by 68% compared to the first half of 2022, marking the lowest first half total since 2010. “It's tight credit availability, high interest rates, and economic uncertainty. And that's just making global investors very cautious,” Barkham said.
Elsewhere, Barkham noted that:
- Industrial/logistics remains the most sought-after property type by cross-border investors, while multifamily is the second most popular sector. “Those are sectors with extraordinarily good tailwinds behind them, even in these depressed times.”
- The number of leases that CBRE is seeing signed this year is only 5% down from 2019, but the amount of space that companies is taking is down 30%.
- U.S. capital outflows into India rose 314% in the first half from a year earlier, reflecting strong interest in the Indian office and industrial/logistics sectors.
· A moderate recovery in capital markets activity is possible in 2024, probably not until the second quarter or possibly even the third. “We are expecting a recovery, albeit not back to pre-pandemic levels, but certainly better than 2023 as we look into 2024.”