Global Capital Flows to US Multifamily Fall Nearly 50%

Global capital inflows into American apartments dropped precipitously in the first half of the year.

As economic turbulence around the COVID crisis weighed on the market, global capital invested in American apartments fell 49.2% year-over-year to $3.1 billion in the first half of the year, according to CBRE, which used in-house and Real Capital Analytics data to come to its conclusions.

A nearly 80% decline in foreign investment in Q2 accounted for most of the drop off, which CBRE attributed to limits on “international travel, difficulty in conducting due diligence and declines in occupancy and rent levels.”

New York, which suffered tremendously from the COVID crisis this year, was the only market with year-over-year foreign investment growth, posting $10.6 billion in sales. Yet, its 641% increase was primarily attributable to two megadeals, according to CBRE. 

Behind The Big Apple, Sun Belt markets Tampa (-28%), Phoenix (-39%), Los Angeles (-55%) and Austin (-69%) were the strongest performers.

When global investors were buying, they had a strong preference for large assets. Almost half the foreign investment dollars spent were on assets priced at more than $200 million. With those preferences, it makes sense that those investors gravitated to more expensive mid- and high-rise apartments (79%) rather than garden apartments (21%). 

In the first half of 2019 the preferences flipped. Foreign buyers invested $4 billion in garden apartments and $2 billion in mid- and high-rise properties.

While foreign buyers bought larger assets, they weren’t purchasing as many portfolios. They invested $2.3 billion in single properties and only $0.8 billion in portfolios. In the first half of 2019, there was an almost even split between portfolios and individual assets.

Despite the volatility in the first half of 2020, Canadians were still the leading investors in American apartments. Canadians accounted for 52% of the international investment in American apartments after claiming 50% in the first half of 2019. Denmark (17%), Israel (12%), Switzerland (6%) and the U.K. (5%) rounded out the top five. 

European investors’ share of multifamily investment volume grew from 11% in the first half of 2019 to 28% in the first half of 2020. The share claimed by Middle Eastern investors dropped from 29% to 12% in the same timeframe. 

Investment managers were the largest bloc of foreign buyers, accounting for 35% ($1 billion) of global investment in American apartments. Institutional buyers claimed a 26% ($786 million) share, while property companies accounted for 19% ($562 million). Other investors, including banks, which includes high-net-worth individuals and corporate users, claimed 16% ($472 million), while equity funds bought 4% ($127 million).