Overseas Investors Turn Net Sellers of U.S. Real Estate
Real Capital Analytics, New York, reported overseas investors became net sellers of U.S. commercial real estate in first-half 2019 for the first time since 2012.
The RCA U.S. Cross-Border Investment Compendium said foreign investors acquired $21.3 billion in U.S. CRE assets between January and June and sold $21.4 billion.
“The pullback was not a function of capital from one region halting purchases; buyers from each major region of the world were active,” said Real Capital Analytics Senior Vice President Jim Costello. “Most, however, simply purchased less than last year.” He noted cross-border direct acquisition volume dropped 37 percent in the second quarter compared to second-quarter 2018.
Total cross-border investment has slipped from recent highs but remains “at a healthy level of activity,” Costello said. “The decline in acquisitions is not a sign of a whole class of investors writing off the U.S.,” he said. “Rather, the high-ticket price deals that these investors pursue are becoming more challenging to execute.”
CBRE, Los Angeles, said sovereign wealth funds, insurance companies and pension funds accounted for 30 percent of inbound volume in U.S. primary markets in first-half 2019 compared to just 3 percent in secondary markets. “Investment from the Middle East and some European countries is up significantly relative to averages over the past five years,” the CBRE Inbound & Outbound Investment Trends report said. “But volume from these countries is not enough to offset declines from the current cycle’s largest capital sources.”
CBRE reported Canada remains the largest source of inbound capital with $5.3 billion invested in U.S. commercial real estate in first-half 2019. Israel ranked second with $1.1 billion and Germany placed third with $1.1 billion.
“Investors appear keen to deploy capital, but their activity in the second half of 2019 may continue to be checked by macroeconomic and political headwinds including international trade wars and Brexit’s impact on the U.K. and Europe,” said RCA Executive Managing Director of EMEA and APAC Simon Mallinson.
