The world’s top investors locked into safe asset classes in 2021

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Global investors poured massive amounts of capital into commercial real estate in 2021, although “it wasn’t exactly a risky trend in acquisitions,” notes Jim Costello of Real Capital Analytics in a new analysis.

“Much of this capital has been deployed to the types of assets considered safer in the face of elements of economic uncertainty,” he says. “Some elements of this uncertainty are increasing through 2022, but it is unclear how the current environment will affect this capital momentum.”

Investors focused their energy on what Costello sees as “single asset-targeted games where revenue and expense structures were protected” last year.and in 2022, they may well turn to risk-resistant assets. inflationary pressures. But “what’s unclear is whether each real estate sector can provide such protection generally or whether such security is only seen in targeted games,” he says.

Collectively, the top 100 global investors were more active buyers than the broader market, buying 83% more than a year earlier. Costello says that on a net basis, these top investors bought more than they sold and collectively added nearly $180 billion in assets to their portfolios in 2021.

These investors were also heavily focused on the apartment and industrial sectors, which accounted for 82% of their net investment last year.

“This overweight to industrial and apartment is nothing new: those two sectors accounted for 78% of these investors’ net acquisition in 2020,” Costello says. “Yet this overweight in 2020 came at a time when net investment in hotels and offices was down from a year earlier.”

Top investors have also re-entered the hospitality and office sectors after a tepid 2020, with acquisitions “targeted at players more resilient to the demand challenges presented in the Covid era,” he says.

“Hotel purchases were more focused on auto-focused properties and vacation-type destinations, and less focused on large business hotels that were struggling because people couldn’t congregate at conferences,” observes Costello. “Growth in investment in the office sector has been aided by growing investor interest in life science assets that are naturally resilient to the challenges of remote working.”

Conversely, RCA analysis notes that net investment in commercial properties fell $2.5 billion in 2020 to a net deficit of $4.5 billion in 2021, fueled by e-commerce and inflationary concerns.

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