Commercial property consultant CBRE is reporting this week U.S. inbound capital fell 6% from the previous year to $11.6 billion in the first half of 2021 — the weakest first-half showing since 2013.
In contrast, strong investor appetite for international industrial assets fueled an 11% increase in U.S. outbound capital, which totaled $23.1 billion in H1 2021. CBRE’s research further reports the following key trends in 2021:
U.S. Inbound Investment Trends
U.S. industrial, which has been the most resilient sector during the pandemic in terms of real estate fundamentals, attracted 21% less foreign capital in H1 2021 than a year ago, given high prices and intense demand from domestic investors. Office had the smallest year-over-year investment decrease (-5%), signaling that the sector may be stabilizing.
Investors from Canada, Singapore and China deployed more capital in the U.S. in H1 2021 than in H1 2020. The U.K., which ranked 10th for total inbound capital over the prior five years, was the only other country in the top 10 with higher year-over-year investment, up by 94% in H1.
Relative to the past five years’ H1 average, inbound capital in H1 2021 increased in just 12 of the top 50 U.S. markets for inbound capital and was down by an average of 61% in each of the top five U.S. markets. Those with the strongest growth from the five-year average were all adjacent to top gateway metros: San Jose and Oakland (San Francisco Bay Area), Northern New Jersey (New York City) and Richmond and Baltimore (Washington, D.C.). This reflects the pandemic-era shift away from dense urban centers and into lower-cost peripheral markets.
.U.S. Outbound Investment Trends
U.S. investors remain enthusiastic about international industrial real estate. U.S. investment in foreign industrial assets increased by 84% year-over-year and accounted for 42% of total U.S. outbound capital in H1.
The U.K. remained the top destination for U.S. outbound capital by a wide margin in H1 and received the largest share of U.S. investment in every sector except hotel. Relative to the H1 average over the prior five years, U.S. investment in the U.K. was up by 128% in H1.
The top five foreign markets for U.S. investment (based on total capital from 2016-2020) have seen steadier capital flows during the pandemic than the top U.S. markets for inbound capital. Outbound capital in H1 2021 was higher than the past five years’ H1 average in Paris, flat in Berlin and down modestly in London.
Credit: World property journal