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Foreign Investment In U.S. CRE Roars Back

Austin, which is among the U.S. real estate markets attracting foreign investor interest.

Foreign investors have returned in force to buy U.S. commercial real estate, acquiring $70.8B worth of assets in 2021, according to Real Capital Analytics data, as reported by The Wall Street Journal.

That total is more than double the dollar volume of foreign investment in U.S. real estate in 2020, and the highest total since overseas pensions, sovereign wealth funds and other institutions invested $94.6B in 2018.

Not only has the volume of investment from overseas returned, but such investors are also beginning to turn their attention to markets they might have overlooked in the 2010s, when they focused on gateway metros like New York and San Francisco.

“It is a different world,” JLL Global Head of International Capital Coverage Riaz Cassum told the WSJ. “You’re starting to see big institutional investors looking at Dallas, Charlotte, Denver, Nashville, Austin and other high-growth, low-tax markets.”

Like their domestic counterparts, foreign investors are focused on 2021's hot property sectors, such as apartments, industrial properties and the life sciences sector.

In the case of life sciences real estate, investment opportunities are still highly concentrated in certain markets. The top three life sciences markets are Boston, San Francisco and San Diego, which among them comprise more than half the life sciences space in the U.S., reports AFIRE, the association for overseas real estate investors focused on U.S. commercial real estate.

Overall investor interest, foreign and domestic, in U.S. properties bounced back last year. Sales surpassed $300B in Q4 '21, according to Real Capital Analytics, with the apartment sector representing nearly one-half of total deal volume.

The U.S. market had already reached a record annual total by the end of November, RCA reports, and in December, more than $160B in assets changed hands. That brought the total for 2021 to $809B, topping the previous record year of 2019, when about $600B in real estate traded.