Seattle is Now the Top Choice for Foreign CRE Investors
Manhattan has slipped to the second position after occupying the top slot in 2020.
Traditionally, you could comfortably pencil in Manhattan for the top spot in the US for cross-border investment on Real Capital Analytics’ US Cross-Border investment Compendium.
But that changed in Q1 as Seattle (with an 11% YOY decline) took the top spot in the 12 months through Q1 2021, after moving up from the No. 2 spot last year. Manhattan (-79%) has slipped to the second position after occupying the top slot in 2020. San Francisco (-28%) remained in the third spot. Chicago (+28%), which was No. 6 last year, moved into the fourth spot. Dallas (-46%) dropped from No. 4 to No. 5.
Atlanta (-34%) also dropped a spot—from No. 5 to No. 6. Los Angeles (-69) held onto the No. 7 spot, while Phoenix (+7%) retained the No. 8 slot. Boston (-20%) moved up from No. 10 in 2020 to No. 9 this year. San Jose (+6) had a large jump—moving from No. 19 in 2020 to No. 10 this year.
RCA’s Jim Costello says that the only time Manhattan hasn’t occupied the top spot was in “the depths of the Global Financial Crisis when deal activity fell so sharply everywhere that cross-border deal volume was measured in the tens or hundreds of millions across markets rather than in the several billions.”
This time, Manhattan’s dip can be explained by uncertainty about the office market. Costello says the large, core assets in the Manhattan office market have traditionally met the investment objectives of cross-border investors. Now, logistics assets are filling that role.
These trends may shift as more foreign investors step up their buying and selling in the market, which according to indications from AFIRE, or the Association of Foreign Investors in Real Estate, should happen this year. Sixty percent of responding investors to a 2021 survey expect to be more active this year.
The online survey was of 101 respondents from 19 different countries over a three-week period in March. The percentage of investors expecting to put more money into US CRE was much larger than for Europe (17%), Asia-Pacific (9%), the UK (7%), Canada (5%), or Australia and New Zealand (3%).
Nearly three-quarters of respondents forecasted an increase in US investment allocation within three to five years. For non-US-based investors, the number was 71%, while for US-based investors, it was 79%.