Knight Frank forsees that 2022 will be a record year for capital flows, with the US, the UK, Germany, France, and the Netherlands forecast to be the most popular destinations for that capital. The firm expects a resurgence of interest in the office sector, as well as continued growth in residential and industrial investment.
The US, Canada, the UK, and Germany are forecast to be the largest sources of cross-border capital, dominated by investment managers, institutions, and private equity investors.
The largest increases in activity are likely to be seen in EMEA and APAC, with EMEA predicted to be the top region of interest next year. While overall investment into the Americas is expected to moderate, the US is forecast to remain the number one destination for inbound capital over the coming year, as well as the largest global deployer of capital.
Overall, the office sector globally is expected to account for just over half of all cross-border investment volumes, indicating that interest in this sector remains very much alive, even as we continue to see a rotation of assets by investors, particularly private equity, into the industrial, residential, life sciences, and data centres sectors.
Prime office buildings in Melbourne and Sydney with a NABERS rating of 5+ enjoy a 17.9% premium on sales price compared to equivalent unrated buildings, while even those with a lower NABERS rating enjoy an 8.3% premium.
Prime Central London office buildings with a BREEAM Excellent rating enjoy a 10.5% premium on sales price compared to equivalent unrated buildings, while those with a BREEAM Very Good rating enjoy a 10.1% premium.
Investment managers and institutional investors are expected to lead the demand for office assets, while HNWIs will demonstrate strong interest too, particularly into the UK and US office markets.
Sustainability is an increasingly global focus for real estate investors, and Knight Frank expects this to spur capital flows towards greenrated buildings and buildings which have the potential to be made ‘green’ over the coming year. As embodied or lifecycle carbon emissions gain importance for investors, 2022 could also see more interest in asset repurposing and refurbishment opportunities.
