• Thu. Dec 1st, 2022

Acquisitions of foreign investors in commercial real estate in the United States increased by 49% in 2021

ByWillie M. Evans

Feb 16, 2022

A strong 2021 recovery in the U.S. commercial real estate market attracted foreign investors who purchased approximately $57.7 billion worth of U.S. commercial real estate in 2021, up 49% from 2020, according to the 2022 Commercial report. NAR’s Real Estate International Business Trends.1

In the large capital market where transactions amount to at least $2.5 billion, Real Capital Analytics reported that cross-border capital flows increased 44% to $52.9 billion over the past four quarters through Q3 2021, accounting for 8% of total domestic and cross-border transactions of $638.2 billion. This brings 2021 cross-border flows back to pre-pandemic levels ($52.6 billion in 2019). Foreign institutional investors (professionals, pension funds and sovereign wealth funds; banks; insurance companies) led the acquisitions of commercial real estate, acquiring 37 billion dollars, or 70% of the 52.9 billion dollars of cross-border flows.

Meanwhile, in the “small” commercial real estate market where approximately 80,000 National Association of REALTORS® commercial members primarily do business, NAR believes that foreign investor acquisitions of commercial real estate facilitated by members NAR trades more than doubled in 2021, reaching $4.8. billion compared to $2.0 billion in 2020. Transactions by foreign buyers accounted for 3.1% of the estimated $155.9 billion trade transactions among NAR trade members. Unlike the “big” real estate market, individual investors accounted for 97% of this market.

While Canadians, Asians and Europeans were the biggest buyers of US commercial real estate valued at $2.5 million or more, the top buyers of NAR’s commercial members were from Latin America and Canada. Mexico was the first country of origin (23%). Other Latin American buyers came from Colombia (10%), Argentina (8%), Venezuela (8%) and Brazil (5%). Canada, the second largest foreign buyer of commercial real estate brokered by NAR commercial members, accounted for 13% of transactions.

No respondent reported a buyer in China. In 2020, Chinese buyers were the top foreign buyers of U.S. commercial real estate brokered by NAR Commercial Members, accounting for 14% of foreign buyers. Transactions with Chinese investors have been blocked by COVID-related travel restrictions.

Florida was the top destination for foreign buyers of U.S. commercial real estate for NAR commercial members, with a 22% share. Texas came in second with a 14% share, followed by California with a 9% share. Georgia, New Jersey and North Carolina each took a 5% market share while Arizona accounted for 4%. No respondent reported a foreign buyer buying from New York, even though this accounts for 3% of NAR trade member business. On the other hand, New Jersey attracted foreign buyers, representing 5% of foreign buyers while this state represented only 1.3% of NAR’s business members.

Among NAR Commercial Members, multi-family buildings and land were the preferred real estate acquisitions for overseas buyers of NAR Commercial Members. Multi-family buildings accounted for 25% of commercial purchases by foreign buyers, while land accounted for 21%.

Positive outlook in 2022 for most real estate sectors

With travel restrictions easing and vaccination and herd immunity rates rising, NAR business members expect commercial property acquisitions by overseas buyers to increase for most types of properties. properties, except offices and hotels. They expect the biggest increase in acquisitions for apartment buildings (+3%) and land (+2%). However, they expect a decrease in their commercial office and hotel transactions with foreign investors.

NAR trade members indicated that the main attraction of the US trade market is that it is a secure and stable place to do business. It is experiencing strong demand and growth, and cap rates are better than in other markets. There is available inventory and opportunities in commercial properties like the transformation of Class B shopping centers.

1 The 2022 International Commercial Real Estate Trends Report examines purchase trends of foreign buyers of U.S. commercial real estate in 2021 in the “small commercial real estate market” (sales below $2.5 million ) and in the “large commercial real estate market” (sales of at least $2.5 million). The “large commercial real estate market” data is based on data from Real Capital Analytics’ cross-border data streams over a period of 4 quarters up to the third quarter of 2021, while the “small commercial real estate market” data commercial real estate” are based on NAR’s survey of its approximately 80,000 members whose primary specialization is in commercial real estate or who hold designations from NAR’s commercial affiliates, namely CCIM®, Society of Industrial and Office REALTORS® (SIOR®), REALTORS® Land Institute (RLI®), Institute of Real Wealth Management (IREM®), and Real Estate Advisors (CRE®).