Knight Frank’s first Active Capital webinar of the year, hosted by Victoria Ormonde, Head of Capital Markets Research at Knight Frank, provided a comprehensive overview of commercial real estate capital flows, with a special focus on U.S. outbound flows. The webinar aimed to equip clients with valuable insights for informed decision-making in the rapidly evolving global market.
Key Highlights:
- Overview of Global Cross-Border Activity: The webinar emphasized the significance of U.S. capital as a key indicator of global investment trends. In 2023, there was a 45 percent decrease in overall global cross-border activity, with U.S. investors notably stepping back, particularly in the office sector, witnessing an 80 percent decrease in outbound flows.
- Positive Signs for 2024: Knight Frank’s capital gravity model forecasts a rebound in U.S. outbound investment in 2024, albeit remaining around five percent below the long-term post-GFC average. The model predicts that approximately one-third of U.S. outbound investment could target the UK, followed by Germany, Spain, Canada, and Japan.
- Top Destinations for US Outbound Flows: The top 10 destinations for U.S. outbound investment include the UK, Germany, Spain, Canada, Japan, Australia, France, the Netherlands, Sweden, and South Korea. While flows are expected to increase, some destinations might not reach 2020 levels, with exceptions like Spain, potentially experiencing the strongest flow of U.S. capital since 2019.
- Sectoral Focus: Logistics and living sectors are predicted to be the top two outbound sectors of interest for U.S. investors, followed by retail, office, and hotel. Despite a forecasted increase in U.S. interest in the office sector, volumes are expected to remain less than half of the 2022 levels.
- Investor Types: Private capital, especially private equity, is deemed crucial for the recovery process. The forecast suggests a reengagement of U.S. private equity in international markets, with strong interest in logistics and residential sectors across various global locations.
- Emerging Markets: There is potential for increased U.S. flows into emerging markets, including India, presenting opportunities for investors looking beyond traditional destinations.
Knight Frank’s webinar provided a nuanced outlook on U.S. outbound capital flows, offering valuable insights into the global real estate market for 2024. The forecasted rebound in U.S. investment, sectoral preferences, and the role of private capital underscored the dynamic nature of the commercial real estate landscape, presenting both challenges and opportunities for investors in the coming year.