The US is expected to dominate capital flow in 2021, while cross-border investment from Singapore to Australia is also expected to be strong, according to Knight Frank.

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 ($13.3bn) and from the US to the UK ($10.1bn) 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.

The predicted top 10 flows for cross-border real estate investment in 2021:

1. Canada to United States                    $13.3bn
2. United States to United Kingdom     $10.1bn
3. United States to Germany                 $8.1bn
4. United States to France                     $4.9bn
5. United States to Japan                       $4.7bn
6. Germany to United States                 $4.2bn
7. Singapore to Australia                       $3.8bn
8. Singapore to United Kingdom          $3.1bn
9. South Korea to United States            $3.1bn
10. United States to Netherlands            $3.0bn

The top 5 sources of capital in 2021:

1. United States
2. Canada
3. Germany
4. Singapore
5. United Kingdom

James Buckley, Knight Frank Executive Director of Capital Markets, said core, income-producing assets in ‘near-neighbour’ locations would also attract demand, particularly when physical travel remains subject to restrictions.

“At a time of heightened uncertainty in the wider economic and geopolitical context and extensive overseas travel restrictions brought about by COVID-19, we expect Malaysian investors to continue to focus on their local market in the short term," he said.

Knight Frank Malaysia Executive Director of Capital Markets James Buckley. Source: Knight Frank

"With the historically low overnight policy rate, the gradual lifting of the lockdown measures and the government’s successful crisis management of the pandemic, we have seen a sharp rise in the number of enquiries to buy commercial real estate from Malaysian investors since August and we anticipate domestic sales volumes will increase."

"The sale of development sites has rebounded particularly strongly in the third quarter of this year, with volumes up 14.5 per cent year-on-year, albeit somewhat skewed by China Railway Group acquiring an interest in the Bandar Malaysia site.

"We do anticipate more cross border transactions once a vaccine is rolled out and international travel resumes which we anticipate will be in second half of 2021.”

Andrew Sim, Knight Frank Head of Global Capital Markets and MD Europe, said large pools of capital still needed to be deployed through the search for income and yield, despite the uncertain climate.

"Investors are of course being ever more forensic in their decision-making with very clear sector winners and losers apparent to all," he said.

"Recent events have seen real estate investors increasingly position for resilience.

"This includes identifying assets which are able to sustain tenant demand and support rents, underpinning capital values and ultimately returns, as well as assets which are best placed to weather shocks and benefit from the recovery and wider structural changes."

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