The U.S commercial real estate market flashed a warning sign in the first half of 2019. For the first time in 7 years, foreign investors in office buildings and residential space became net sellers of properties, according to a new report from Real Capital Analytics, which tracks the industry.
This comes after a strong 2018, when cross-border investment in commercial real estate hit near-record levels.
“These investors still purchased assets,” wrote Jim Costello, the report’s lead author. “They simply sold more than they bought.”
Direct acquisitions amounted to $21.3 billion in the first half of the year, down by more than 40 percent compared a similar period in 2018. Elsewhere, sales amounted $21.4 billion.
No particular zone was responsible for the downward curve, though China notably slipped to No.9 in the ranking of investors. The Asian country, which has enforced stringent rules on capital outflows, was No. 4 in 2018 and No.3 in 2017.
The report termed the trend as a “yellow warning sign rather than a red one.”
“It is not a whole class of investors writing off the US,” Real Capital Analytics said. “Rather, the high-ticket price deals that these investors pursue are becoming more challenging.”
A notable segment of investment in the last one year comes from Canada, which accounted for 55 percent of all overseas investment in the sector, according to the report. A significant factor is large deals made by real estate giant Brookfield Asset Management (BAM).