Since 2012, the international investors became net sellers of commercial real estate for the first time this year. A single country cannot be held accountable for the change, what changed the investment equation was a small pullback in purchases.
In the first half of 2019, the investors made direct acquisitions around $21.3 billion and sold1 a little bit more at $21.4 billion as per the recent data available.
Senior Vice President of Real Capital Analytics, Jim Costello said “Prices are at record high levels in the U.S. Our cap rates are at record low levels. On the face of it, it would be hard for investors to put money to work in the U.S. The yield opportunity is not what it was a few years ago.”
Blackstone is reportedly buying U.S. warehouse properties from Singapore based GLP for around $19 billion.
In the second quarter of the present financial year, acquisitions dropped 37% relatively from the second quarter of FY 2018-19.
Costello added, “We will see huge net selling by cross-border investors in the second half of the year when the announced purchase of GLP by Blackstone closes.”
Due to volatile interest rate and currency exchange rate, it is becoming difficult for the investors to hedge against the risks of the market. Although they are still active, have not only purchased less but have also sold less.
Costello said, “If I have a good cash-flowing asset right now, and it’s a devil I know, as opposed to the uncertainty in the world, and when you have so much uncertainty increasing, and you’re not sure what’s going to happen next in the economy, stick with the devil you know, as opposed to sell the property and then how to I redeploy that cash? That’s the real challenge investors face right now. There is not some better option when they’ve got a high-quality property that’s cash flowing.”
Office and apartment sectors have witnessed increased investments after a big push into the retail industry last year. More capital is being invested in Boston, New York, Seattle, Las Vegas and not much in Los Angeles, San Jose, Phoenix, Washington, D.C. according to the recent data available.
Singapore, Germany, and Canada are the top buyers of U.S. commercial real estate by Dollar value while China is a much smaller investor.