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Essential IR Insights Newsletter - February 2023

Global investment in RE hits record $1.8 trillion despite macroeconomic concerns

According to Cushman & Wakefield's research study, Winning in Growth Cities, global investment in real estate grew 18% year on year to hit a record $1.8 trillion in the 12 months to June.

Despite sluggish economic cycle growth and geopolitical uncertainty, Asia powered the sector both as a capital source and as an investment destination. Asia-Pacific investors dominated cross-border investment, with a 45% market share over the period.

New York, Los Angeles and London attracted the most investment out of 25 cities shortlisted, with Toronto being the first Canadian city to make the list in five years. Toronto logged a 50.3% increase in investment capital over the year-ago period.

Asian cities secured three spots in the top 10 in 2018, compared to none in 2017, with Shanghai and Tokyo garnering greater investor interest for cross-border capital flows and Hong Kong remaining the strongest Asian market, with investment capital growing 67.9% year over year.

The industrial sector posted the largest increase in investment, from across all capital sources, over the year to June, with cross-border investors upping their exposure by almost 100%, mainly through Chinese investment in European logistics assets. Cross-border investment also grew in the apartment sector, with the highest investment volumes on record.

Cross-border and domestic investors favored the office market during the period, with the European office market responsible for more than 40% of global office-related investment activity.

The retail sector saw domestic investment decline and cross-border investment rise, while the hotel sector posted an overall decline in transactions over the period.

Looking ahead, the report said that although there are clear risks in the macro environment, there is little to suggest that a recession is on the horizon, with inflation being less of a threat than originally thought. However, central banks are likely to continue tightening due to price signals, with the slow rise in interest rates and declines in quantitative-easing driven liquidity to continue, the report noted.

The report forecasts that investment activity could rise by up to 2% in 2019, led by global buying.