Jamil Harkness is a senior research analyst at CBRE.
Foreign industrial investment tripled in the Southern California market last year. Research from CBRE show that Los Angeles, Orange County and the Inland Empire collectively accounted for 6.3% of total foreign investment in the US. Investors from China, Singapore and Canada were the most active last year, and industrial assets were the most popular investment class.
“Over the last five years, industrial assets have appreciated in value and become increasingly more attractive to foreign investors in part due to advancements in e-commerce and omnichannel strategies,” Jamil Harkness, senior research analyst at CBRE, tells GlobeSt.com. “A strong local economy coupled with solid industrial fundamentals have continued to give investors, foreign and domestic, confidence to place money in our region's industrial assets.”
Foreign investment has been strong since 2010 in the US, totaling $52 billion. The Southern California region has accounted for one-tenth of this investment activity, with a surge coming last year. Ecommerce and omnichannel investment has also expanded during this timeframe, and Southern California has grown into a leader of the booming industrial market. This combination has helped to increase foreign interest in Southern California.
In this time, the pool of foreign capital has been consistent, with China, Singapore and Canada leading the market. Capital from Norway, Japan, Germany and Australia has also accounted for a significant portion of acquisition volume. “Since 2010, large amounts of foreign capital poured in from China, Singapore and Canada, representing 74% of capital influx into the Greater L.A., Orange County and Inland Empire region,” adds Harkness. “China and Canada were the most consistent within an eight-year span, but Singapore and European nations became more activity after 2014. Prior to 2015, foreign investment totaled about $640 million, since then it has jumped to $4.14 billion from 2015 to 2018, exceeding the previous four years by nearly $3.51 billion.”
Looking ahead, Harkness expects more of the same. The key players and a focus on industrial assets won't change as long as fundamentals remain strong,” he says. “It is expected that foreign investment from key players such as China, Singapore and Canada into our region's industrial assets will continue due to positive fundamentals, e-commerce demand and a diverse local economy. There remains a lot of foreign capital to be invested and greater L.A., Orange County and the Inland Empire is a major target, so there is plenty of runway left. In 2019, more foreign investors should find additional opportunities to invest in last-mile assets and other industrial in-fill projects, as more e-commerce users desire to be close to population centers.”
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