Foreign Investors Have a Bigger Appetite for U.S. Commercial Property This Year

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In years past, U.S. commercial real estate property owners could count on healthy inflows of capital from foreign investors eager to tap the country’s market  fundamentals. Recently, those investments have dwindled and last year cross-border investment in this country fell to its lowest level in a decade, according to Colliers Capital Markets. 

How bad were the numbers? Foreign capital invested in the U.S. totaled $34.8 billion, which was a 53% decline from the prior year. 

Net acquisitions were -$12 billion. The report cited elevated inflation, rising interest rates, a strong dollar and geopolitical strains as the reasons. The trend was widespread with all major investment regions being net sellers.  

The top 15 cross-border investors to the U.S. in order were Canada, Japan, South Korea, Germany,  Switzerland, Spain, Singapore, Israel, United Kingdom, Bahrain, Australia, France, Netherlands, Mexico and Thailand. 

This year could well prove to be a very different situation, if early trends continue, Colliers’ Research Director of Capital Markets Aaron Jodka writes.  One indicator was global investment firm GIC partnership with Oak Street to take STORE Capital Corporation private in a $15 billion deal. The transaction more than quadrupled sales volume from Singapore, Colliers reported. 

Other major international buyers have been GPIF (Japan), Credit Suisse (Switzerland), Brookfield Asset Management (Canada), Hyundai Motor (South Korea) and Investcorp (Bahrain). 

And although Colliers didn’t mention it, a South Korean investor is said to have snapped up San Francisco’s 286,000-square foot office tower at 350 California Street at a 75% discount to its asking price. 

Cross-border investment for Q1 has climbed to $15.6 billion, according to estimates with a net acquisition of $11.7 billion. A recent Association for International Real Estate Investors survey showed U.S. allocations are up 6% on the year.

Finally, cap rates in the U.S. have also escalated more rapidly than in other regions of the globe, which makes U.S. real estate much more appealing. And because REITs have been hammered, they have become attractive to investors as well. 

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