February 20, 2020
The latest research by Real Capital Analytics (RCA) reveals cross-border acquisitions of U.S. commercial real estate dropped below $50 billion in 2019. That’s the lowest level of investment activity in five years.
RCA’s US Cross-Border Investment Compendium shows overseas investors accounted for just 8% of U.S. deal volume for the year, down from a high of 18% in 2015.
Canadian investors were again the dominant investor group in 2019, accounting for about a quarter of cross-border deal activity. Still, their spending dropped 71% from 2018, when several entity-level transactions occurred.
RCA’s Jim Costello wrote, “The last time this activity was so low was in 2014, just as the acquisition spree by Chinese investors was building up steam. This retreat below the $50 billion mark is not just a story about Chinese buyers, however, nor is it a sign of impending doom in the market. In some respects, the market is returning to normal in that Canada was again the largest country for cross-border investment in the U.S. last year.”
German investors came in the second position and Switzerland was the third largest investor in the U.S. last year. South Korea claimed the No. 4 spot, while investment originating from Hong Kong Special Administrative Region and China was No. 5.
Costello added, “The pullback of Chinese investors still receives attention, though it is rather old news. In 2019 these investors ranked at only No. 16 for cross-border acquisitions in the U.S. More capital is now coming to the U.S. from the Hong Kong Special Administrative Region than mainland China. Hong Kong investors ranked at No. 5 for 2019, just behind South Korean investors.
“Even though the heaviest period of Chinese investment started after 2014, these investors were far more active in 2014 than last year,” notes Costello. Purchases by Chinese investors came in below $1 billion in 2019. The last time deal activity by Chinese investors was less than $1 billion was in 2012, he points out in the report.
The top cross-border buyers in 2019 were Germany’s Allianz, Bahrain’s Investcorp, Canada’s Brookfield AM, Spain’s Ponte Gadea and Canada’s BentallGreenOak. On the sell side, the top players from No. 1 to No 5 on RCA’s ranking were China’s GLP (Nesta); Canada’s Brookfield AM, Canada’s CDPQ; Bahrain’s Investcorp and Canada’s Starlight Investments.
The U.S. markets where most cross-border activity occurred were Manhattan, which experienced a 37% drop in 2019 over the previous year; Seattle, which saw a 38% year-over-year increase; Los Angeles (46% decrease); San Francisco (2% increase); and Dallas (28% decrease).
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