Foreign Investment in U.S. Poised for Record?

August 21, 2015

A flood of foreign investments pouring into the U.S. commercial real estate market could reach a record high this year, according to real estate services firm JLL.

"We have strong inbound capital that we believe will see the U.S. exceed the previous peak of 2007 by year-end," says Lucy Fletcher, vice president of international capital group and capital markets with real estate services firm JLL.

JLL estimates that foreign investments in U.S. property totaled $24.1 billion as of mid-year -- compared to $23.6 billion during all of last year. JLL's data is based on transactions greater than $5 million. It excludes hotels and some multifamily development.

The CoStar Group, a commercial firm, has estimated foreign commercial transactions for the first half of the year to be even higher at nearly $39 billion.

Foreign investor interest in U.S. real estate is growing as the U.S. economy strengthens and low interest rates prevail.

The Chinese are one of the most active groups in U.S. real estate. JLL says that Chinese investors had $1.9 billion in acquisitions during the second quarter of U.S. real estate, more than any other foreign buyers. Chinese investors have mostly targeted office, hotel, and condo properties in major markets. Henry Chin, head of research for CBRE APAC in Hong Kong, also predicts that focus to broaden to other geographic markets as well as other property types, such as industrial and retail, in the coming months.

Foreign investors in U.S. commercial real estate, in general, seem to be shifting their strategies.

"I think this year we have seen a real structural shift into other asset classes," says Fletcher.

For example, during 2013 and 2014, more than half of foreign capital was invested in office properties. However, so far this year, the percentage has fallen to 40 percent, while there has been a significant increase in investment in industrial and logistic properties, Fletcher says.

Source: "Foreign Investment in U.S. Real Estate Assets to Hit Record High," National Real Estate Investor (Aug. 19, 2015)