According to *The Wealth Report*, the flagship global report by Knight Frank, private investors* have remained the most active buyers of global commercial real estate for the third consecutive year in 2023. This year, private capital invested a record $338 billion worldwide, accounting for 49% of total investments—the highest share in history. In 2022, private capital accounted for 44% of all real estate investments. Although private investments decreased by nearly half in 2023 compared to 2022 volumes, this decline was smaller than that of institutional and public investments, which fell by 53%. Interest rates globally are not expected to significantly decrease until the end of 2024, so private capital is expected to remain active.
Alex James, Head of Private Client Advisory – Commercial at Knight Frank Private Office, said, “Global commercial real estate investments fell by 46% to $698 billion in 2023, as investors grappled with raised interest rates and higher debt costs. The reduced volume largely results from limited activity by US investors. In 2023, investments from American capital fell by 52% year-over-year. The heightened activity of private investors under current market conditions should not come as a surprise. This group is relatively well-prepared to conduct transactions in a high-interest rate environment, as private capital is typically less reliant on debt compared to other investor groups.”
Michał Grabara, Director at the Capital Markets department in the Polish branch of Knight Frank, adds, “In Poland, foreign family offices have been active for years, often investing in safe assets with long-term lease agreements – office buildings, warehouses, and retail parks. Their interests also include properties with potential for value growth. Recently, however, there has been increased interest from private Polish capital. Until now, wealthy Poles have most often invested in rental apartments. Currently, their targets also include commercial properties, but those with long lease agreements and requiring minimal active asset management, or properties at very attractive prices. The investment limit for Polish private investors can be defined at around 10 million euros.”
For the first time in history, the industrial and logistics sector was the sector attracting the most interest, absorbing a quarter of all global investments worth $174 billion. While the logistics, industrial, retail, hotel, and senior housing sectors increased their share of total investments in 2023, the office market dropped from 25% in 2022 to 22% in 2023, and the residential sector’s share fell from 30% to 24%. All sectors recorded a yearly decrease in total investments in 2023, with the smallest decline noted in the residential and senior housing sectors (-28%).
In the case of private capital, the share of individual sectors changed. The most frequently chosen was the living segment, followed by logistics and industrial, and then offices. For the High-Net Worth Individuals (HNWI) group, however, offices regained the position as the most popular investment sector, after lagging behind residential investments in 2022. This group of investors benefited from reduced competition.
Investors from the USA, Canada, and Singapore accounted for nearly half of all cross-border global investments in commercial real estate in 2023. However, among the 10 largest global sources of capital, only investors from the United Arab Emirates (+349%) and Japan (+156%) increased their investments in 2023. For Japanese capital, 2023 was a record year for cross-border investments, totaling $8 billion. Buyers benefited from a slower pace of transactions and reduced global competition. Japanese investors were the fifth largest source of cross-border capital in 2023 and for the first time ranked in the top ten.
The largest source of private cross-border capital in 2023 were investors from France, who invested $3.1 billion. In 2024, French private capital mainly targeted European assets, especially in Germany, Spain, Italy, and the United Kingdom. US investors fell from the top position in 2022 to sixth place in the ranking of the 10 largest sources of private cross-border capital in 2023, with investments down 72% year-over-year to $1.3 billion. Meanwhile, cross-border capital from Spain was the largest source of investments made by the HNWI group in 2023, primarily targeting commercial properties in the USA, Ireland, the Netherlands, and the United Kingdom.
It is expected that in 2024 the living sector will enjoy the highest demand from investors—14% of respondents in the Attitude Survey conducted by Knight Frank plan to focus on this asset class. Interest is highest in Europe, the Middle East, North America, and Asia.
*Private investors are companies controlled by private individuals and whose activities mainly focus on servicing, constructing, or investing in commercial real estate.
