【WORLD PROPERTY JOURNAL】Reversing Course: U.S. Commercial Investment Capital Outflows Now Exceed Inflows

For the first time since 2014, says CBRE

With the longest global economic expansion on record, international commercial property investors now face an increasingly complex calculus in identifying cost-effective opportunities for potential downturn protection, and slowing cross-border capital flows.

Because of such, CBRE is reporting this week that inbound capital to the U.S. dropped 54% in 2019, largely due to a sharp decrease in entity-level sales that tend to be highly volatile from year to year.

In 2018, rising U.S. interest rates and discounted REIT share prices contributed to entity-level sales' unprecedented 51% share of total inbound volume. But as these trends reversed in 2019, this share dropped to just 6%. Excluding entity-level transactions, 2019 inbound investment decreased by a more moderate 12.1%.

With U.S. capital outflows down by just 1% from 2018, the amount of capital that U.S. investors deployed in foreign real estate markets exceeded inbound capital by nearly $18 billion in 2019.

Sovereign wealth funds, insurance companies and pension funds (SWIP) together accounted for 30% of inbound volume in primary markets during H1 2019 compared with just 3% in secondary markets.

Foreign investors are also venturing into secondary and tertiary locations, though proximity to gateway markets is still preferred. Industrial hubs and demographic-driven multifamily markets are considered attractive now too.

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Commercial News » New York City Edition | By Michael Gerrity | February 14, 2020 8:00 AM ET