How do US investor trends pave the way for global real estate market recovery?

At least part of the forty five percent decrease in overall global cross-border activity last year (2023) was as a result of US investors stepping back from the international market. This was particularly acute in the office sector, which saw more than an eighty percent decrease in US outbound flows. This all means it is crucial to understand US capital flows when looking forward to the year ahead.

Positively, our Knight Frank Capital Gravity model shows US investment beginning to flow back into the global market this year, albeit remaining around five percent below the long-term post GFC average. It forecasts that approximately one-third of US outbound investment could target the UK, followed by Germany, Spain, Canada and Japan. With Australia, France, the Netherlands, Sweden and South Korea completing the top ten destinations.

You can explore the Capital Gravity model below, as well as read our top three headlines.

1. While we predict an uptick in investment from the US, we don’t expect volumes to necessarily be back to 2022 levels, albeit with some exceptions. For example, Spain could experience potentially the strongest flow of US capital since 2019, especially from private equity into the residential, hotel, and logistics sectors. Sweden will see moderated growth and smaller flows, but could see increased interest from a variety of investor types compared to the last few years across most sectors.
   
   
2. Following a beds, sheds, eds and meds thesis for the year ahead, we predict logistics and the living sectors to be the top two outbound sectors of interest by US investors, followed by retail, office and hotel. While US interest in the office sector across the 18 international locations in our model is expected to pick up compared to last year, it is forecast to remain less than half that of 2022 volumes. 
   
   
3. We forecast US headquartered private equity to begin to re-engage in the international markets, potentially even surpassing 2022 volumes. Notably, half of this activity is forecast to target logistics, especially in the UK and key European locations, along with strong interest in the residential sectors in the UK, Spain, Germany, Japan, Australia, and Canada. The hotel sector could also see private equity interest particularly into Spain, which has seen healthy economic growth in the hospitality sector, as well as the UK. Looking further to more emerging markets, we could also see an uptick in US flows into India.

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To find out how we generate the data behind our Capital Gravity model, you can read more information and the methodology here. 

You can delve into more detail on global real estate recovery in 2024 and US outbound investment trends in our recent webinar.