The data was compiled for JLL's most recent Global Real Estate Capital Report, which found that direct real estate investment in all commercial real estate property types reached a record $759 billion last year, up 8% from the preceding record-breaking year. Significantly, over 45% of volume traded involved a cross-border purchaser or vendor, compared to 43% in '06. Direct commercial real estate investment in the Americas totaled $304 billion in '07, up 8% over '06, with the US accounting for 93% of the total, or $282.7 billion. About $91 billion, or 30%, of the Americas total involved cross-border transactions. According to the report, the trend was driven by global sources of funds, as well as by UK, US, German, Gulf Cooperation Council, Australian and Singaporean investors.
The downtick in US industrial purchases by foreigners may be an anomaly rather than a trend. Craig Meyer, a managing director of JLL and the national practice leader of its industrial services group, reports a growing number of inquiries from offshore entities looking to acquire US industrial buildings or development sites. "It's not unusual that pension funds or other financial sources would provide funding for a large American developer like Trammell Crow, ProLogis or ING Clarion," he tells GlobeSt.com. "But in the last 60 days, I've had at least three different inquiries from foreign investment entities looking to make direct investments here, acquiring and owning property." The queries came from Austria, France and Scandinavia.
"I think what you're seeing is that industrial real estate is becoming very much a global business," says Meyer. "AMB has proven that. ProLogis has proven that. In Europe and China, you're seeing the same brand names you see here. What you may see next is foreign developers building projects in the states." As with US developers overseas, he adds, foreign companies will be concentrating on sites around major ports and airports rather than the nation as a whole. They also will focus primarily on large distribution complexes with sufficient value to make their investments worthwhile.
In Meyer's view, it only makes sense that foreign investors would be funnelling capital into the US because the weak dollar makes owning US hard assets far less expensive than two years ago. That they would move into industrial also makes sense, he adds, because American high-quality industrial property is the safest product type in the world. "That's what clients are telling me, and I think it's true," he says. "We did a survey of the top institutional owners and developers, and the overwhelming majority viewed industrial as the preferred and safest asset class over the next 12 to 18 months."
The declining value of the dollar does not necessarily portend a decline in US investment overseas, the JLL exec emphasizes, because most major American developers have created offshore subsidiaries that raise capital in the markets they serve rather than relying on home-based sources. "If they've incorporated in the UK, for example, and funded in the UK, they're somewhat insulated from the problems with the dollar," he points out.
Meyer does not expect big gains in value for US industrial product in the coming year, but more importantly he also does not expect values to erode, as may happen with other product types. "Industrial has been fairly steady over this last cycle," he remarks. "We haven't had a lot of run-up of excess space. It hasn't been the glamor product for investors, more the steady Eddy in the background, which is working to its advantage right now."
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