Foreign capital flowing into the U.S. fell 54% last year as entity-level sales plummeted, particularly in the retail asset class, CBRE reported Friday.
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Were it not for this steep drop in entity sales, foreign investments in U.S. retail assets would have increased by 8% last year, according to CBRE.
An entity-level sale is a transaction where a buyer purchases all assets and liabilities tied to a business entity as opposed to the straight sale of property.
U.S. investor outbound activity, or capital outflows heading out of the U.S, exceeded inbound foreign capital by $18B in 2019. CBRE blames the pullback in inbound foreign capital on interest rate and REIT adjustments between 2018 and 2019.
Two years ago, interest rates and discounted REIT share prices pushed entity-level sales to more than half of all inbound foreign capital.
"As these trends reversed in 2019, this share dropped to just 6%," CBRE analysts wrote. "Excluding entity-level transactions, 2019 inbound investment decreased by a more moderate 12.1%."
Despite foreign capital inflows falling in the U.S. last year, five markets — including Dallas-Fort Worth — continued to attract investor dollars from other nations.
DFW alone pulled in $1.9B in foreign capital inflows last year, ranking fifth in year-over-year growth, behind Baltimore, which grew 1,682% year-over-year to $697M, Miami (up 222% to $997M), San Jose (up 173% to $975M) and San Francisco (up 77% to $2B).
Office was the favored asset class for foreign investors playing in DFW, San Francisco and San Jose. Foreign capital entering Baltimore and Miami placed a stronger emphasis on multifamily and hotel investments, respectively, CBRE said.
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The top five foreign players in the U.S. included Canada with $12.2B in capital heading into the U.S., followed by Germany ($3.5B), Switzerland ($2.3B), Spain ($2.2B) and Singapore ($2.1B).
U.S. investors played most heavily in the U.K., with $12.9B in outbound U.S. capital heading across the pond last year, followed by Germany ($10.3B), France ($4.9B), Italy ($3.8B) and Spain ($3.5B).
China failed to rank in the top 10 in both U.S. capital inflows and outflows.
Foreign investors who made the most impact in the U.S. came from America's northernmost neighbor.
Canada represented more than half of total foreign investment volume in multifamily and retail last year, while Germany led in U.S. office investments, CBRE said.
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