Foreign investors were behind 21 percent of the total industrial real estate investment volume in the U.S. in 2018, according to a recent CBRE report. The activity translated into an aggregate $14.4 billion in acquisitions.
Per the report, created with research from CBRE Research and Real Capital Analytics, the billions of dollars foreign investors spent on purchasing industrial assets in 2018 marked a 152.2 percent jump over the 2017 total. The massive increase can be attributed to several sizeable, entity-level deals. Looking at transactions through a multiyear lens, the numbers may vary widely, but the trajectory is the same—upward.
“Deal volume has increased by 68 percent for the past five years, even when excluding the large entity-level transactions,” Matthew Walaszek, senior research analyst with CBRE & report co-author, told Commercial Property Executive. “This is indicative of the strength of the industrial sector, as foreign capital sees logistics as a viable asset class.”
Big spenders in big towns
Canada was the top source of inbound capital into the U.S. industrial sector, with buyers from north of the border investing approximately $5.5 billion, which accounted for 39 percent of the total of cross-border industrial deals. China was a relatively close second, having spent roughly $4.5 billion on purchases, followed by Singapore’s $3.3 billion investment. Germany- and Switzerland-sourced investments accounted for an aggregate 3 percent of the total volume. Bahrain was active, with Investcorp increasing its U.S. footprint through the $300 million acquisition of a 4.5-million-square-foot national warehouse portfolio.
Los Angeles, the tightest industrial market in the country, was highest on foreign investors’ radar in 2018, recording $910.1 million in transactions. Dallas/Ft. Worth and Chicago followed with investments totaling $849.1 million and $618.4 million, respectively. Atlanta saw the fourth-highest amount of investments with $474.5 million. New York recorded the fifth highest cross-border industrial investment volume with transactions totaling $414.2 million.
The foreign investment community’s strong attraction to the U.S. industrial sector is unlikely to end anytime soon. Although, the high level of acquisition activity may soon begin to dwindle.
“Looking ahead, industrial cross-border investment is not expected to match the huge volumes seen in recent years, given the significant amount of M&A activity that has occurred,” Walaszek said. “Nevertheless, there are strong indicators that foreign investors will continue to view industrial real estate as an attractive asset class, with secondary markets such as Columbus, Cincinnati, Denver and Kansas City seeing more investment.”