Foreign Investment In U.S. Real Estate Remains Elevated; Capital Preservation And Stability Often Prioritized Over Yield

Foreign Investment By Property Type

Broad Array of Markets and Asset Types Targeted by Foreign Capital
Highnetworth individuals and other small private capital entities from foreign countries have become increasingly active in commercial real estate. In recent years, they have also gained a presence in the $1 million to $10 million private investor buyer pool and have spread capital into several metros. Generally, location preferences have aligned with the presence of large communities from the investor’s country of origin. The precise proportion of the $1 million to $10 million price tranche coming directly from foreign capital is difficult to estimate as investments are often conducted through a fund or U.S. intermediary.

Apartment: Private buyers were highly active in the direct acquisitions of sub$10 million apartment properties in the past 12 months. Canadian investors formed the largest contingent of cross border apartment buyers and focused on suburban complexes in markets that include Atlanta, Dallas/Fort Worth and Phoenix, a winter destination for many Canadian citizens. Canadian buyers, with their long history of U.S. commercial property ownership and familiarity with a range of markets, appear comfortable seeking potentially higher yielding assets outside of the largest primary markets.

Industrial: A large portfolio purchase by the Canada Pension Plan Investment Board accounted for most of the dollar volume in the under$10 million tranche of industrial properties directly traceable to foreign entities over the past year. The remaining purchases of industrial assets were conducted by private capital originating from Australia, Brazil and U.S. cross border trading partners Canada and Mexico. Warehouse and distribution assets in U.S. transportation and logistics hubs were the primary targets of the private capital tranche, though Latin American investors favored MiamiDade.

Office: Purchases of office properties pricing for less than $10 million that were directly attributable to foreign capital were restrained due to the greater complexity of office property ownership. During the past 12 months, private buyers originated from Canada, China, Ireland and Israel. Many of the deals in the sub$10 million tier involved suburban assets in secondary markets including Dayton, Ohio and Memphis. Niche properties, including MiamiDade office condos and a suburban Seattle medical office building, were also among the properties trading for less than $10 million.

Retail: A variety of assets and markets were targeted in sales of retail properties pricing for less than $10 million over the past year where the source of capital was identified as cross border. Some multitenant assets were sold to foreign buyers, but singletenant netleased properties were often favored due to their risk profile, passive investment characteristics and low knowledge hurdles required to own. Private foreign buyers purchasing retail assets primarily came from Australia, Canada, China and Mexico.

Hospitality: Asian Americans and American citizens born in India historically comprise a large share of ownership of limited service properties in the U.S. and foreign capital has maintained a presence in the pool of potential investors. Over the past 12 months, individual private overseas investors accounted for 69 percent of the dollar volume of hotels pricing up to $10 million directly purchased by foreign entities. Canadians were the most active group in this segment.

 

View single page >> |
How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.