RCA Insights

Canadian Investors Become Largest Cross-Border Buyers in US, Report Shows

By on August 30th, 2017

Canadian investors have retaken the lead as the largest source of cross-border investment capital in the U.S., the latest US Cross-Border Investment Compendium shows. These buyers increased the pace of their acquisitions in the first half of 2017 as the volume of deals by Chinese investors ebbed.

Capital flows from China, which were the largest source of cross-border investment in the U.S. in 2016, have declined this year in anticipation of newly-approved regulations to control capital outflows to overseas commercial real estate investments.

Despite this pullback by Chinese investors, capital flows from Asia were up for the first half of the year. As one investment group pulled back, others stepped up, including Japan, Singapore and Hong Kong. Higher average yields on offer in the U.S. and excess savings at home helped to drive capital flows overseas.

 

1708 Cross Border Comp Costello main-01

If one looks at China not just as the mainland, but including activity from Hong Kong as well, volume would still be down but not as sharply. Hong Kong investment activity in the U.S. grew 35% year-over-year in the first half of 2017.

Capital from the Middle East continued to decline in H1’17. There is a notion circulating in the commercial real estate industry that this pullback is an issue of the changing U.S. political environment. However, deal volume from Middle Eastern capital sources to Europe also fell in H1’17. Politics may guide some elements of investing such as deal structures (i.e., direct, joint venture, or fund levels) but ultimately, the combination of capital availability and relative returns on offer will guide flows overall.

If you are a current RCA subscriber log into your account to download the  US Cross-Border Investment Compendium for H1’17 from the RCA website.

Jim Costello

Jim Costello

Senior Vice President
jcostello@rcanalytics.com

Jim Costello has worked in the CRE space on issues of urban economics since 1990, including a 20-year stint at Torto Wheaton Research. Jim expanded the reach of the Torto Wheaton Research team developing forecasts of global market fundamentals. He also developed approaches to pair the forecast results with frameworks to answer investor questions on asset values and relative investment opportunities.

In the aftermath of the Global Financial Crisis, Jim provided advice to the Treasury Department and helped educate these professionals on commercial real estate performance. Jim is a member of the Commercial Board of Governors of the Mortgage Bankers Administration, where he helps policy makers understand the commercial real estate industry.

Jim is expanding the capabilities of the Real Capital Analytics team on issues of real estate market dynamics. Jim has a master’s degree in economics and is a member of the Counselors of Real Estate.