Market Recovery Underway in H2 2024

CBRE reports that global real estate capital flows showed significant growth in the second half of 2024, pointing to an ongoing market recovery. 

Total cross-regional capital flows to North America, Europe, and Asia-Pacific increased by 31% year-over-year to $US37 billion, marking the highest half-year total since H2 2022. Although considerably lower than the peak of US$88.5 billion in H2 2021, this increase suggests the global market recovery is well underway.

The industrial & logistics sector attracted the most cross-regional investment for the fourth consecutive half-year period, holding a record 47% share. The office sector also experienced a marked recovery, with a 50% year-over-year increase in cross-regional volume. Conversely, retail and multifamily cross-regional investment volumes remained stable, while hotel investments decreased slightly.

Regarding regional specifics, U.S. total inflows in H2 2024 increased by 40% year-over-year to US$9 billion, with a particular interest in prime industrial & logistics and office assets in key markets such as New York, Boston, and San Francisco. Europe, the largest recipient of cross-regional investment, reported a 10% year-over-year increase in cross-regional inflows. Meanwhile, cross-regional inflows to Asia-Pacific grew by a staggering 221% year-over-year in H2 2024 to US$6.3 billion, largely driven by North American investors active in Australia and Japan.

However, the global economy faces certain challenges. Long-term government bond yields remain high, particularly in the U.K. and U.S., which might limit cap rate compression. Despite this, investment volume increases are expected this year, with predictions of 8% for the U.S., 15% to 20% for Europe, and 5% to 10% for Asia-Pacific.

In North America, cross-regional investment increased by 40% year-over-year to US$9 billion in H2 2024, primarily driven by European investors. However, investment activity may be muted in the first half of 2025 due to relatively high long-term bond yields.

In Europe, cross-regional capital inflows increased by 10% year-over-year to US$21.63 billion in H2 2024, following the European Central Bank’s initiation of an interest-rate-cutting cycle. Despite political uncertainties in certain regions, the investment outlook for Europe in 2025 is positive, with further interest rate cuts expected.

Asia-Pacific reported a surge in cross-regional inflows by 221% year-over-year in H2 2024 to US$6.3 billion. North American capital inflows, particularly from U.S.-based fund managers, primarily targeted Japan. The region expects to see increased investment activity in 2025 despite macroeconomic uncertainties.

Looking ahead, cross-border capital flows are projected to further increase in 2025 as interest rates continue to fall and market fundamentals improve. However, downside risks remain due to elevated long-term bond yields, potential tariffs, and geopolitical uncertainties. Nevertheless, global real estate investment volumes are expected to increase 11% this year.

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