Foreign capital is definitely coming into the U.S. real estate market more strongly than ever, but analysts and researchers are conflicted over by how much. What is likely is that this year will be a record breaking one.
Real estate services firm JLL estimates that according to the strong level of inbound capital, The U.S. market will exceed its previous 2007 high by the end of the year. At the half year mark, JLL estimates overall cross-border investment at $24.1 billion, higher than the $23.6 billion for the entire of last year.
The CoStar Group however, estimates foreign investments in U.S. real estate much higher $39 billion for the first six months, while Real Capital Analytics estimate it could be $71.6 billion for the last 12 months. Foreign investors made up around a quarter of all property investment sales in the U.S. for the second quarter, reflecting the current strength of the economy, the low interest rates, attractive spreads, and its liquidity and transparency.
While foreign capital is coming from a variety of countries, China is by far the biggest investor at around $1.9 billion in the second quarter, compared to $700 million by South Korea, $600 million by United Arab Emirates, and $500 million by Canada.
As Chinese annual outbound capital invested into global commercial real estate markets exceeded $10 billion for the first time, its shows the potential to have an even larger impact on real estate in the future.
While in the past, it has not been easy for Chinese investors to invest overseas due to government restrictions, since they were lifted four years ago, commercial real estate investment has seen a compound annual growth rate of 72 percent reflecting their like for its transparency, the liquidity of the market, and its steady economic growth.
A change in investment strategies is also taking place, as in the last two years more than 50% of foreign capital was invested in office properties, while this year, that has dropped to 40% as investors focus more on the industrial sector.