Steve Wagner

Foreign investors are increasing industrial investment activity in Southern California. According to research from JLL, industrial purchases have accounted for 52% of all foreign investment in Orange County in the last 24-month period. Foreign investors have acquired 5.4 million square feet of industrial property in the market. The trend is directly linked to the growth of ecommerce this cycle, which has increased industrial appetite for both domestic and foreign capital sources.

“Over the last 10 years industrial property has become an increasingly popular investment class throughout the United States, and targeted both by domestic and foreign capital as the industry becomes more institutionalized,” Steve Wagner, managing director at JLL, tells GlobeSt.com. “As consumer habits change, and warehouses in densely populated areas become more valuable to corporate America's business model, markets like Southern California continue to lead.  Foreign investors are attracted to the United States, and particularly to Southern California, due to the strong economy and long-term growth prospects. Simply put, Southern California industrial is a much better alternative to many other investment opportunities foreign capital may consider.”

Foreign investment in industrial took off in 2018. Canada, China, Germany, Singapore, and Japan are have been the most active foreign investors, and in that order. The presence of these aggressive buyers has changed the dynamics of the industrial market. “It has made an already competitive market, that much more competitive,” says Wagner. “For the same reasons foreign buyers are attracted to So Cal industrial, domestic investors are attracted to it.”

In step with the demand for warehouse space, foreign capital is playing the big box market, buying 100,000-plus square-foot facilities. However, recently, foreign capital has also become active in small box facilities. “There is a very large appetite from individual foreign investors for smaller industrial properties, either for their own business use or as an investment,” says Wagner. “Internationally recognized locations tend to see strong demand from these types of buyers.”

With a conservative but positive economic outlook and healthy consumer spending, foreign appetite should continue to be strong. “I believe the demand will continue. With the economy of many other countries slowing, Southern California will continue to be targeted as a sale alternative for capital deployment,” says Wagner. “This will mean the competition for quality assets will continue.”