California CRE News In Your Inbox.
Sign up for Connect emails to stay informed with CRE stories that are 150 words or less.
$12 Billion Capital Surplus for U.S. Commercial Real Estate
More capital crossed U.S. borders in both directions during H1 2018, with foreign inflow up by 29% from H1 2017 and U.S. outflow up by 15%. Research by CBRE found, on net, the U.S. commercial real estate market had a capital surplus of roughly $12 billion.
Total investment into the U.S. totaled $29.7 billion in H1 2018, according to CBRE, compared to $23 billion in H1 2017. The most active foreign sources of investment into the U.S. were EMEA ($12.3 billion), APAC ($9.9 billion) and Canada ($7.1 billion). Manhattan saw the most in-flow of foreign capital at $3.6 billion, followed by Los Angeles ($3 billion) and Chicago ($970 million).
Savvy foreign investors have several strategies to mitigate foreign exchange risk when acquiring U.S. assets, one of which is purchasing forward contracts to hedge against U.S. dollar depreciation. The cost of hedging against U.S. dollar depreciation is rising, which reduces effective yields for many foreign investors, despite the growth and liquidity U.S. investments may offer, notes CBRE. That easing of inbound capital flows over the past 24 months has provided more opportunities for domestic investors.
French company Unibail-Rodamco’s acquisition of Westfield, which included a $7.7 billion shopping mall portfolio, elevated inbound capital flows from REITs and France, as well as foreign retail acquisitions, to record highs.
For comments, questions or concerns, please contact Dennis Kaiser
- ◦Sale/Acquisition
