Knight Frank’s Active Capital 2020 finds that cross-border investment into safe-haven locations and ‘near-neighbours’ are set to dominate global capital flows in 2021, as COVID-19 shifts trends in real estate investment and global mobility.
Using a bespoke ‘capital gravity’ model which forecasts likely flows of capital between countries and their estimated size for 2021, the research predicts that investment from Canada to the US ($13.3 billion) and from the US to the UK ($10.1 billion) will dominate transactions, with Germany, Singapore and South Korea also likely to be major players in cross-border investment activity.
The focus of these capital flows will principally be between liquid, resilient and trusted global safe-havens. Nevertheless, core, income-producing assets in ‘near-neighbour’ locations will also attract demand, particularly when physical travel remains subject to restrictions.
The predicted top 10 flows for cross-border real estate investment in 2021:
Canada to United States $13.3bn
United States to United Kingdom $10.1bn
United States to Germany $8.1bn
United States to France $4.9bn
United States to Japan $4.7bn
Germany to United States $4.2bn
Singapore to Australia $3.8bn
Singapore to United Kingdom $3.1bn
South Korea to United States $3.1bn
United States to Netherlands $3.0bn
The top 5 sources of capital in 2021:
Andrew Sim, head of global capital markets and MD Europe, Knight Frank, commented: ”While we are clearly in a period of heightened uncertainty, large pools of capital still need to be deployed driven by the search for income and yield. Investors are of course being ever more forensic in their decision-making with very clear sector winners and losers apparent to all.”
Will Matthews, head of commercial research, Knight Frank commented: “At a time of heightened uncertainty in the wider economic and geopolitical context, the security of real estate income will remain a compelling attraction for investors. What’s more, as the pandemic forces the rise of localism in domestic economies, there will be even more reason for investors to seek the benefits of true diversification via cross-border acquisitions.”