Commercial Real Estate International Business Trends
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The 2021 Commercial Real Estate International Business Trends Report discusses the trends in foreign buyer purchases of U.S. commercial real estate in 2020 in the “small commercial real estate market” (sales of below $2.5 million) and in the “large commercial real estate market” (sales of $2.5 million or over).
The COVID-19 pandemic led to the worst economic collapse since the Great Depression, with the global economy contracting by 4.4%. Only 7% of members of the National Association of REALTORS® (NAR) with a primary specialization in commercial real estate reported they had transactions with international clients in 2020 compared to 12% in past years. Foreign buyer purchases decreased across all property types, with the biggest pullback in the office, retail, and hotel sectors. Land, multifamily, and industrial acquisitions also declined but less sharply. Among NAR commercial members’ transactions, China held its spot as the top foreign buyer of commercial real estate although its share declined to 14% in 2020 from 20% in the prior year.
In the large commercial market characterized by acquisitions of at least $2.5 million, cross-border financial flows fell by 30% in 2020, according to Real Capital Analytics market data. In the large capital market, Canada remained as the top investor in U.S. commercial real estate, while Manhattan continued to attract the most capital.
While cross-border capital inflows decreased, two positive trends are worth noting. The first is that even if inflows decreased, current investors did not pull out their existing investments so that on a net basis, the net divestment in 2019 (-$10.9 billion) reversed into a net investment in 2020 ($ 13.5 billion). In short, the United States became a global investment haven in 2020. The second positive trend is the emergence of secondary/tertiary markets in investor’s commercial portfolios.