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Foreign Investors See US as Safe Haven

CHICAGO—Although they haven't made any blockbuster portfolio buys in the first four months of the year, foreign investors have kept up a steady stream of purchases in the industrial market.

By Brian J. Rogal | brianjrogal | | Updated on July 18, 2016

 

chi-FosterErik (5) Erik Foster of Avison Young
CHICAGO— Avison Young’s national industrial capital markets group reports that foreign investors continue to look to the US industrial market as a safe haven, spending $732.3 million on distribution, warehouse and related spaces in the first four months of 2016. Based on the company’s analysis and data from Real Capital Analytics , from January 1 through April 30 the top countries of origin were Canada ($364 million); Switzerland ($142 million); Germany ($135.7 million), Israel ($40 million); the UK ($22 million); China ($19.3 million) and Japan ($9.5 million). Although these numbers are dwarfed by the multibillion dollar portfolio purchases completed last year, foreign money has kept flowing to the US at a steady rate. And rather than stick exclusively with properties in gateway cities, recently foreign investors have increasingly looked for places where they can get higher returns.    “We are seeing more foreign money getting into secondary markets,” Erik Foster, an Avison Young principal and the practice leader for the national industrial capital markets group, tells GlobeSt.com. He points to the CenterPoint Properties Trust’s recent sale of a 1.7 million square foot portfolio in the Milwaukee area to Westmount Realty Capital LLC and its partner, Switzerland-based Partners Group , as a good example of what we should see more of this year in markets like Charleston, Charlotte, Columbus, Indianapolis, Louisville, Minneapolis and Orlando. “Comparatively speaking, foreign investors see greater stability and growth potential in our real estate and our economy,” he adds. “And if you look at the industrial capital markets’ landscape, you will see that it is one of the safest places to put your money.”   The top industrial markets for foreign investment were Hartford, CT ($105.5 million); Chicago ($84.3 million); Los Angeles ($66.4 million); East Bay/San Francisco ($65.7 million); Cleveland ($57.5 million) Columbus ($54.8 million) and Miami ($27.7 million). Last year was a blockbuster, with foreign investment volume reaching $27.4 billion as a result of several massive portfolio and platform sales. For example, Global Logistic Properties Ltd. and GIC Pte. Ltd. , Singapore’s sovereign wealth fund , bought the massive IndCor industrial portfolio for $8 billion. Foster says it’s still possible we could see medium to large portfolio sales later this year. But even if there are no true blockbuster deals, t he 2016 figures indicate that by year end, the total volume would be about $2 billion, in line with the $2.4 to $3.1 billion invested per year in each of 2012, 2013 and 2014. Foster believes investors will continue to find solid opportunities in the US. “We are hearing that the portfolios of some institutional owners, especially pension fund advisors, are now overweighted when it comes to real estate,” and to address that, some will start putting assets on the market.        Those moves should pull more foreign investors into the US, while at the same time Brexit gives them a push. “It’s obvious that Brexit has had an impact on the global economy,” Foster says. And as foreign investors seek to avoid the turmoil in Europe, “it benefits the US in that more money will come here and into the industrial market.”

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