During the global pandemic of the past 2+ years, our collective worlds got much smaller, and that, of course, included real estate investment activity. Travel restrictions made in-person deal-making nearly impossible, so many investors turned their attention to opportunities closer to home.
Recent signs indicate that the tides are shifting, however, reverting back to pre-pandemic levels of cross-border initiatives and even exceeding some levels of prior investment. Improving macroeconomic conditions have bolstered investor conviction in commercial real estate, with investment in the U.S. notably rebounding at an accelerated pace.
According to data gathered by JLL, global real estate investment reached its highest quarterly level on record at $126 billion at the end of 2021. And, cross-border investment in US commercial property markets delivered the second strongest quarter on record, with most of the money pouring into the industrial and multifamily sectors, accounting for two-thirds of all foreign investment activity.
Evolving commercial real estate trends — including the rise of hybrid work necessitating flexible office space, the protracted-but-triumphant return to hospitality venues, a hot multifamily market and the push to upgrade infrastructure and logistics — converged to aid investment and support the CRE industry last year, and now investors feel ready to look beyond their front door for enticing opportunities, especially as competition fuels demand.
The Bigger the Better?
Increasing investor confidence and access to dry powder have not only accelerated investments in recent months, they have supersized them. Reports of gargantuan deals in Asia Pacific and Europe have investors jockeying to find their own headline-making transaction — or at least one with a high yield.
Investment interest was substantial throughout the traditional markets of the UK, Germany and France in 2021, with capital pouring into office, industrial and residential properties from foreign investors. 2022, however, looks to be a banner year for the Middle East, Africa and the Asia Pacific regions. Intraregional investment activity has been bolstering competition and supporting pricing in both regions, but interregional investment is expected to grow — and the deals are expected to get bigger and more expensive.
The Drive to Diversify
In today’s still-uncertain market, commercial real estate funds are enjoying a recent influx of capital thanks to a robust fundraising environment; investors are searching for characteristics that real estate typically provides, such as diversification, fixed income, lower volatility and a hedge against inflation. Real estate continues to provide some cushion from rising global prices, while low levels of commercial property supply and strong demand mean that a fall in valuations is not expected over the coming year.
These factors influence cross-border investment initiatives, as well, with global investors recognizing the opportunities that exist in farther-flung markets. The current appetite for logistics, living and alternatives assets doesn’t stop at the U.S. border, and investors are seeking out emerging markets for ripe investment opportunities.
How PropTech Plays an Important Role
As the world re-opens and cross-border real estate investment heats up, the need for powerful technology to source available deals, effectively connect with capital and manage all fundraising activity becomes even more imperative.
Intelligent real estate tech is a hot ticket, with proptechs garnering record investment in recent years. According to Crunchbase, real estate and property technology companies raised nearly $21 billion in 2021 and are expected to continue growing this year.
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