Private investors were the most active buyers in global commercial real estate investment in 2022, a new report said. A significant $455 billion was invested, accounting for 41% of the total.
According to The Wealth Report, Knight Frank’s flagship report, this represents private investors highest share of global commercial real estate on record and is the first-time private investment has surpassed institutional investment.
2022 was the second strongest year on record for commercial real estate investment volumes amongst private investors, with investors capitalising on repriced assets and favourable currency positions.
The year saw $1.12 trillion global commercial real estate investment, the report said.
The report added that private investors and private capital refer to investment from family offices, private individuals and privately held companies.
Institutions invested a total of $440 billion in 2022, 28% below 2021 volumes, but 2% above the 10-year average. By comparison, whilst private capital investment was down 8% from its all-time high of $493 billion in 2021, 2022 was still the second strongest year in history sitting 62% above the 10-year average.
Multifamily residential, or private rented sector (PRS) was the investment of choice with $194.9 billion invested into this sector, followed by offices and industrial and logistics combined.
The US, UK, Germany, Canada and France were the top destinations for private capital in 2022. However, of the top 10 destinations, the UK (+1%) and France (+21%) were the only countries to see year-on-year increases in investment from private sources.
The US ($302 billion), Canada, France, Germany and the UK made up the top five sources of private investment, with private capital from France increasing investment by 27% in 2022.
US cities remained a target for private investors in 2022, with US metropolises accounting for 67% of total private investment. Paris was the only city outside of the US to feature in the top 10.
Although eleventh overall (cross-border and domestic) in 2022, London was the top performing city for cross-border private capital with $2.5 billion invested. Overall, this accounted for 44% of the total private capital investment into the city and 15% of total global cross-border private buyer investment into cities in 2022.
Alex James, head of private client advisory, Knight Frank, said, “Private buyers are taking advantage of the ongoing repricing of assets and stronger currency positions, which has given them a competitive advantage against large institutions who are more sensitive to debt and often have shorter-term investment horizons.”
“Residential is generally the entry point into the sector for ultra-high-net-worth individuals, but a larger weight of private capital is targeting commercial property given attractive pricing and stable income from well-located assets with tenants on long-term leases.”
“This trend is set to continue with private investors seeking liquid, wealth preservation options in the current inflationary environment and investment grade commercial real estate with a strong occupier and sustainability profiles will become a more prominent part of global portfolios,” James said.
Inflation will be a significant factor influencing decisions in 2023, with 80% of respondents to Knight Frank’s High-net-worth Pulse Survey stating that it would influence their investment decisions either significantly (37%) or to some extent (43%).
The US is expected to be the top destination for private capital again next year, followed by the UK, Germany, Japan and the Netherlands. Of the top 10 destinations for private cross-border capital, seven are in Europe, with private investors favouring the continent.
Offices will continue to dominate. Over 40% of total private cross-border capital is forecast to be targeted at the office sector, while industrial and residential are expected to receive a 19% share each. UK offices are forecast to be the top target for UHNWIs in 2023, with offices in the US, Germany, Australia and the Netherlands also likely to experience robust demand.
Wealthy individuals from the US are forecast to be the most active, accounting for roughly half of all global cross-border capital into commercial real estate in 2023. Likely targets include office in the UK, Japan and Singapore, as well as industrial assets in Germany, Japan and South Korea.
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