European Investors Return to the US in Force

European investors are returning to the US markets after a period of inactivity during the pandemic, says Jeremy Katz, co-head of CP Capital. In 2020, European investment stalled due to travel restrictions during the pandemic, but those investors have now returned with a renewed enthusiasm.

“There is a pent-up demand that is materializing. In 2020, Europeans literally could not come here, so foreign investment dropped pretty precipitously because of the practical challenges,” Katz tells GlobeSt.com. “That demand didn’t go away, but those investors weren’t able to execute. Now, investors are playing catch-up and trying to meet their allocation targets.”

The pandemic and the Russia-Ukraine conflict are contributing to European demand for US real estate with a specific emphasis on multifamily and industrial. “COVID has shifted the focus from office, retail and hospitality to multifamily and industrial, which have proven resilient,” Katz says. “Everyone saw what happened to those sectors during the last two recessions, and so there has been a reallocation of capital to those directions.”

In addition to the pandemic, the Russian-Ukraine conflict has created an increased exodus to the US market. “The Russian-Ukraine conflict is acutely felt in Europe. We are hearing from investors that there is a renewed attention on the US as a safe haven,” says Katz. “Investors are getting their capital into the US as that conflict continues and potentially expands.”

While these recent events have attracted European buyers stateside, Katz explains that there has long been European investment in the US due to favorable population patterns. In fact, CP Capital has been serving European investors in the US for the entirety of the company’s 33-year history, according to Katz, who says that the firm closely tracks the markets as a result.

“When you compare the demographic changes in the United States to Europe, it is pretty stark. We continue to have steady population growth, which drives real estate demand and in particular apartment growth,” says Katz. “We have had that in our country forever, and in Europe, you have flat or even declining population growth. That has been the case now for the last three decades, and it is something that European investors fundamentally understand.”

However, the pandemic has shifted population trends in the US, driving people into new markets, specifically in the Sunbelt region. While Katz says the firm has been a longtime advocate of investing outside of the coastal markets, the pandemic has helped to push investment into new markets. “If you go back to the 1980s and 90s, a lot of Europeans only wanted to be in New York, Boston, Los Angeles, San Francisco and Washington DC. That has changed over time. European investors have taken note of the migration patterns to the Sunbelt and the Smile markets,” says Katz. “That has fueled investor demand in multifamily development and acquisitions in those markets.”