The United States, which once ranked at the top of a list of planned global commercial real estate investment destinations, fell to 10th place in a survey by Knight Frank, a London-headquartered real estate consultancy active in over 50 markets worldwide.
Six out of 10 global CRE investors with plans to invest $144 billion this year made the United Kingdom their primary investment target, followed by Germany, France, Spain and the Netherlands. Australia and Japan entered the list for the first time, due to structural growth and expected interest rate cuts.
Survey respondents included 119 global investors with over $1.4 trillion of assets under management (AUM). Though most respondents were from Europe, North American investors led in AUM.
"It is North American capital, primarily from the U.S., which is expected to provide scale and accelerate early-cycle opportunities in core European cities and targeted Asia-Pacific markets," Knight Frank stated.
"Capital is becoming more selective, concentrating in locations where confidence in values, liquidity and exit prospects is highest," the report noted. And investors are not waiting for a global recovery, instead investing where entry pricing is clearer and execution risk is lower.
Some 87% of respondents by AUM – 69% by number – plan to be net buyers, signaling a strong appetite for acquisitions, the report said. Since only 13% intend to be net sellers, it raises the possibility of intense competition for desired assets.
"Investor sentiment is shifting from caution to conviction following several years of higher interest rates, pricing uncertainty and constrained liquidity," the report noted.
Office is the leading sector expected to benefit, with 69% of investors aiming for it with "selective conviction… This reflects confidence in workplace recovery, the enduring role of prime as well as pricing adjustments," the report commented, "with a focus on ESG-compliant assets in core CBDs, and repriced secondary assets with repositioning potential."
Rentals are the second-most-prized asset class, with 65% of investors eyeing them. The categories most in demand are multifamily (46%), student housing (35%), single-family rental (22%), affordable or social housing (25%), co/flex living (20%) and senior living (17%).
Industrial/logistics holdings are being watched by 63% of investors. This category is described as a high-conviction sector, whose appeal is underpinned by "supply-chain resilience, steady e-commerce penetration in certain markets, and its growing strategic importance for national and economic security."
Retail is targeted by 56% of respondents and is seeing a measured resurgence. Typically, investors are focused on income resilience and repriced opportunities rather than structural turnarounds.
The report also identified a growing interest in operational and alternative sectors like healthcare, data centers, infrastructure and life sciences. Investments are generally modest, accounting for less than 10% of total allocations. "But their inclusion reflects longer-term structural themes shaping portfolio construction," the report commented.
Global investment will largely be dominated by mid-market deals between $50 and $100 million, balancing scale and efficiency. Deals of $250 million or more will be concentrated in industrial, office and retail.
"For some investors, deploying at scale will mean multiple mid-sized positions and/or partnering for access to larger, more complex opportunities."
Strategically, allocations for core industries are expected to attract 26% of planned investment ($37 billion), core plus 23% ($33 billion), value add 19% ($27 billion) and opportunistic 28% ($40 billion).
Even though investment in traditional sectors remains the norm, the survey showed increased interest in thematic diversification and exposure. However, investors expect a clear premium for complexity, execution risk and repricing uncertainty.
Other factors will also influence CRE decisions, the report noted. They include interest rates, occupier demand, bond yields, demographic changes, AI, liquidity, market transparency and geopolitical risk.
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