Thanks to good locations and low risk, industrial real estate has long been an attractive asset class for foreign investors, with one notable exception — China. That has changed over the past 12 months, and in a major way that signals the bull market for industrial real estate has plenty of runway.

According to a new report on industrial capital markets by Avison Young, foreign investors bought $4.3B in U.S. industrial real estate assets between Q1 2016 and the first three months of 2017. Foreign entities bought 79 industrial properties across the country in Q1 2017, totaling $1.3B in trade volume. But the most surprising information from the report is the amount of capital being deployed by Chinese investors, which bought $284.9M in industrial real estate in Q1 2017, compared to $5.2M for the same time frame last year, a 540% increase year-to-year.

Avison Young principal Erik Foster is not shocked China is finally warming to the industrial sector. China is a large country with a great amount of wealth to deploy, and Foster said industrial real estate continues to be a stable asset class and a core component to a well-rounded real estate investment portfolio. Vacancy rates in major markets like Los Angeles, New Jersey and Chicago are solid at between 4% and 5.5%, 970M SF of new industrial product was delivered between 2011 and 2016, and there was 259M SF of new industrial under construction nationally at the end of Q1.

This combination of factors makes industrial a lower risk than other asset classes. Now that the floodgates are open, Foster expects China and western Europe, particularly Germany, will push deeper into the industrial sector as industrial is seen as a safe haven against their countries’ currencies, and economic and political uncertainties. German investors bought a modest $13.2M in real estate assets in Q1, which placed it sixth out of the top seven foreign industrial real estate investors.

As impressive as the Chinese investment numbers are, Canada remains the runaway market leader in industrial real estate investment. Investors from our neighbor to the north, flush with wealth from oil sands in the western provinces, bought 43 assets totaling $831.1M in Q1, attracted to U.S CRE and industrial specifically because of a lack of dense population centers in their home country.

The lion’s share of Canadian activity in Q1 came from one deal: Brookfield Asset Management’s $680M acquisition of 37 properties from TA Realty of Boston in March. Portfolio sales have been a primary driver of activity since 2015, when portfolio, or whole company, sales accounted for $27.3B in foreign investment activity.

Foster said to expect foreign investors to continue to leverage capital as they expand their industrial portfolios and demand reaches regional and even secondary markets. He expects sector-specific funds to trade in the $300M to $700M range. Midwestern secondary industrial markets like Minneapolis ($131.1M from Q1 2016 to Q1 2017), Detroit ($63.6M), Cincinnati ($56.4M), St. Louis ($42.3M) and Columbus, Ohio ($18.3M) have the potential for better returns.

Learn more about trends in the industrial sector at Bisnow's national industrial conference, Aug. 24 in Chicago. The all-day event features speakers from Prologis, EastGroup, Exeter and more.