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Cross-Border Capital Less Interested In U.S. CRE, Except For Big Apple

During the first half of 2018, cross-border investors snapped up $2.19B worth of commercial real estate in Manhattan. That amount places Manhattan as the fourth most popular market for cross-border commercial real estate investment in the world, according to a new report by Knight Frank.

Manhattan was the only U.S. market among the top 10 cities in the world for cross-border investment.

Manhattan was the only U.S. market among the Top 10 cities in the world for cross-border CRE investment.

London was vastly more interesting to cross-border investors, ranking as the most popular market in the world for such capital allocation, with $7.25B invested during the first half of 2018. Shanghai was a close second with $6.48B invested and Paris Central came in just ahead of Manhattan, with $2.39B invested.

Rounding out the top 10 markets globally are Kowloon (Hong Kong), Munich, Western Crescent La Defense (Paris), Dublin, Frankfurt and Tokyo's Five Wards.

“Despite the political turmoil surrounding the U.K. with Brexit, London is once again the most liquid real estate market in the world," Knight Frank Head of Capital Markets London Nick Braybrook said in a statement. "It is more popular as a home for international investment than Paris Central, Manhattan, Munich and Frankfurt combined."

Asian real estate investors continue to be among the most important global capital exporters, with South Korea and Singapore more active than previously, Braybrook said.

"The largest five deals in the market this year have all involved Asian capital, and this trend looks set to continue for the foreseeable future,” he said. 

Why do some countries attract more cross-border investment than others, particularly in the U.K.? Knight Frank took up that question recently in a separate report.

The most popular markets among investors tend to have large and high-quality assets, good levels of transparency and consistency in the rule of law, the report said.

These factors are subject to change.

"Few of the hurdles to inbound investment are insurmountable in the longer term," the report states. "We predict that the fixed or binary factors currently identified as drivers of investment, such as location, language and colonial ties, will become less important over time. 

"Instead, variable factors such as transparency, economic growth and market liquidity will play a stronger role in determining the volumes of capital inflows to real estate."