Per MSCI data, this dollar amount ranked No. 8 among foreign sources of capital into U.S. commercial real estate during that time period. Bahrain finished just behind nearby United Arab Emirates, another moneyed Middle Eastern powerhouse. It’s familiar territory for Bahrain: During the 2022 calendar year, the little island country in the Persian Gulf was 10th among overseas sources of funding. In 2021, it was fifth.

It’s worth noting that in dollar terms, Bahrain’s deal volume plummeted 67% from midyear 2022 to midyear 2023. That’s a significant amount, to be sure, but not out of the ordinary given the state of commercial real estate investments, cross-border or otherwise, over the past year. Of the nine other countries among the top 10 foreign funding sources in that time frame, six posted annualized declines, and five of these pullbacks topped 30%.

Possibly more prescient than the large dip by Bahraini investors as a whole is the activity of the nation’s most prominent stateside real estate investment entity — the aptly named Investcorp, a global funds manager for institutional and private clients with offices worldwide. Among foreign buyers of U.S. commercial properties, InvestCorp snapped up 14 stateside properties and posted the eighth-largest dollar volume for the year ending in Q2 2023, MSCI reported.

The firm has remained proactive since then, announcing a $216 million purchase of an industrial portfolio this past September. The acquisition, peppered across five markets (including Atlanta, Boston and San Antonio), spanned some 1.6 million square feet across 31 infill warehouses with a collective occupancy rate of 94%.

The move pushed Investcorp’s industrial holdings within the U.S. to about 42 million square feet across more than 600 buildings with an aggregate value of $4.8 billion. “Industrial assets have enjoyed consistent performance throughout the recent market volatility as a result of strong fundamentals that are driving outsized demand and considerable rent growth when compared to other asset classes,” said Herb Myers, the company’s co-head of North American real estate, after the September acquisition.

That’s a ringing vote of confidence in U.S. industrial real estate resilience from Bahrain’s most active overseas investment company. Coupled with the strong record for Bahraini investors in recent years, it seems safe to expect another relatively robust year in 2024 from the Middle East’s little investment engine that could. ●

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Reuters reported that construction starts for residential and commercial properties in Germany during the first half of 2023 plummeted by 47% compared to the previous two-year average. The nation’s largest real estate investor, Vonovia, lost $2.2 billion in second-quarter 2023. And German commercial real estate transaction volume in H1 2023 finished at one-third the level of its five-year average, Bloomberg reported.

All of this goes to show that German investors are being quite cautious these days about where they place their money. A normally reliable source of capital into U.S. commercial real estate, Germany recently posted one of the largest pullbacks in a global investment market that’s full of them.

Germany was the No. 3 source of foreign capital into U.S. commercial properties in 2021 and No. 5 in 2022, according to MSCI Real Assets. For the year ending in Q2 2023, however, it dropped to No. 9. During these 12 months, German investors purchased only 14 assets on U.S. soil and their aggregate volume of $696 million was down 91% year over year.

Still, there have been a handful of noteworthy acquisitions by German investors of late. The largest of these was announced in October 2022 when Frankfurt-based Union Investment and a Seattle-based partner bought an office complex in Sunnyvale, California, for $222 million. The property features a new four-story office building that boasts LinkedIn as its main tenant.

Class A multifamily properties remain highly prized targets for overseas investors, and the BVT Group (headquartered in Munich and Atlanta) got its hands on a sprawling apartment community that’s being built in Charleston, South Carolina. The project, which is expected to be finished in the latter half of 2024, will include 336 luxury units. The deal was valued at $96.4 million, MSCI reported. BVT’s U.S. division now owns 30 multifamily assets totaling 9,200 units.

German investors closed three other deals valued at $75 million or more during the year ending this past June, MSCI reported. Hamburg-based ParkProperty Capital shelled out $91 million in July 2022 to acquire a posh multifamily community in Atlanta. The property is within walking distance of many high-paying jobs at Piedmont Hospital.

In January 2023, Munich RE (a multinational insurance group) bought a similarly pedestrian-friendly mixed-use building in downtown Durham, North Carolina. The property is a repurposed tobacco factory and warehouse that now includes 247 apartments and 20,000 square feet of retail space. The price tag was $89 million, according to MSCI. And Munich RE teamed with CBRE Investment Management this past May to nab another Class A multifamily property in Dallas for $77 million.

Although German players have stayed on the sidelines of late, it’s a reasonable bet that they’ll return to action once market conditions improve. Notably, Commerz Real (the real estate wing of Commerzbank AG, Germany’s third-largest bank) recently opened offices in New York City and Washington, D.C. The company has had an on-and-off relationship in the U.S. dating back two decades, and according to one of its fund managers, it has an expressed interest in America’s gateway cities. ●

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The lower level of activity was a dramatic change from 2021 when South Korea accounted for $5.83 billion in U.S. direct acquisition volume. The recent pullback resulted in South Korea plunging on the list of the top countries for capital into the U.S., from No. 3 in 2021 to No. 11 as of midyear 2023, according to MSCI.

In recent times, South Korean corporate investors have been more interested in selling than buying. According to MSCI data, the automaker Hyundai Motor Group ranked No. 20 on the list of top cross-border buyers but was credited with purchasing only a single property during the year ending in June 2023. In the same time frame, Korea Investment Holdings ranked No. 11 among the top sellers after jettisoning seven assets totaling about $1 billion in value.

These numbers, however, are only a small part of the story of South Korea’s recent activity in America. Some of the East Asian economic powerhouse’s largest corporations have committed to making major investments in the U.S. industrial sector now and into the future. That includes a strong focus on electric vehicle (EV) batteries and other cutting-edge technology.

The largest deal announced of late is SK Group’s plan to invest $22 billion in American manufacturing facilities in the coming years. One of South Korea’s largest conglomerates, SK Group has diversified operations across the U.S. that produce everything from pharmaceuticals to EV batteries. It currently employs more than 6,000 people in America with plans to grow its headcount to 20,000 people by the end of 2025.

This year, SK Group subsidiary SK Signet opened a new EV charging plant in Plano, Texas. The facility will have the capacity to produce more than 10,000 ultra-fast chargers each year. A separate SK Group subsidiary is teaming with Hyundai to build an EV battery cell plant in Bartow County, Georgia. This will be SK Group’s third EV battery-making facility in Georgia. Yet another SK Group subsidiary has made agreements with Avis Budget Group to install EV charging stations at the George Bush Intercontinental Airport in Houston. SK Inc. and SK Energy have expanded their presence in North Carolina, adding a second office in the Charlotte area along with a new research and development facility in Raleigh.

Hyundai announced in May 2022 that it would invest $5 billion in the U.S. by 2025 to develop mobility solutions such as artificial intelligence, autonomous driving and robotics. In December 2020, Hyundai made a deal with Japanese investment giant Softbank for an 80% stake in robot maker Boston Dynamics, which is best known for Spot, a robotic dog that can walk on its four legs.

Not to be left out of the EV movement, Samsung announced a $3 billion joint venture with General Motors this past April to develop an EV battery plant in the U.S. The location hasn’t been decided yet, but the plant is expected to open in 2026. Last year, LG Energy Solution, another South Korean industrial power, announced a joint venture with General Motors known as Ultium Cells. The companies are building EV battery plants in Michigan, Ohio and Tennessee. The U.S. Department of Energy provided a $2.5 billion loan to fund the project, which is expected to create 5,100 long-term jobs. ●

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This close relationship holds true within cross-border real estate investments, just as it does nearly everywhere else. Investors from the U.K. are an active group when it comes to outbound activity, directly purchasing some $13 billion in real estate outside British borders in 2022, according to CBRE. The vast majority (83%) of this capital was deployed in other parts of Europe, but American assets gathered their fair share of British attention as well.

During the year ending in second-quarter 2023, investors with ties to the U.K. poured roughly $1.3 billion into 22 U.S. commercial properties, per MSCI Real Assets. That dollar amount was good for No. 6 among the top countries for acquisition volumes into the U.S. during this period, up three spots compared to their ranking for the 2022 calendar year.

According to MSCI data, the country’s most active U.S. buyer in 2022 was London-based GSA International Ltd., a major worldwide name in student housing. GSA accounted for six of the 25 stateside acquisitions by U.K. investors last year, and it has been assertive in the flourishing U.S. student housing space since its entry into the market in late 2020. The latter half of 2022 continued this pattern, highlighted by the August procurement of the 796-bed Waterloo Tower in Austin and the October purchase of five other premium assets comprising 1,600 beds in Austin; Flagstaff, Arizona; and Charleston, South Carolina.

GSA carried this momentum into 2023, with the company announcing this past January that it had closed more than $550 million in financing facilities across the U.S. through a joint-venture partnership with Morgan Stanley Real Estate Investing. GSA officials touted their ability to secure new lending partners in the current economic climate as a testament to the quality of the company’s track record, the quality of its target assets and the stability of the student housing space. Indeed, having expanded its footprint to more than 18,000 beds across 32 cities in 23 states, GSA seems poised for further growth in a burgeoning sector and appears to be a British-based player to watch.

It’s worth noting that U.K. involvement in U.S. commercial assets has slowed of late. During the four quarters ending this past June, investments from U.K.-based funding sources fell by 39%, MSCI reported. That’s a sizable decrease at face value, but it’s not as brow-raising as one might think.

For one thing, the slowing commercial real estate climate has pushed most cross-border investment into the red across the board. Only three of the top 25 foreign sources of capital grew their U.S. outlays during these four quarters, and the U.K.’s year-over-year decrease in this time frame pales in comparison to that of fellow heavy hitters Germany (-91%) and South Korea (-92%).

Furthermore, British real estate investors appear to be just as motivated as they have been in recent years. According to CBRE’s Investor Intentions Survey released this past March, investors from the U.K. expected to maintain comparable levels of activity this year as in 2022, offering optimism as further data for this year’s transactions becomes available. ●

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Singaporean investors are important players in the global economy. With a total outlay of more than $1.75 trillion, the nation has the world’s sixth-largest state-owned investment system (which includes central banks, sovereign wealth funds and public pension funds).

Worries about a global recession, however, appear to be prompting a recent pullback in certain sectors. For instance, among the top 25 countries for capital placed into U.S. commercial real estate, Singapore had the largest drop-off in dollar volume from 2021 to 2022. Singaporean investors purchased 80 properties last year for a total volume of nearly $1.8 billion, but that was 89% below the level they posted a year earlier, according to MSCI Real Assets.

The attrition can be tied in large part to the disappearance of Mapletree Investments, which holds some $77 billion in global real estate assets. Mapletree and one of its subsidiaries placed more than $5 billion into U.S. properties in 2021, but neither entity was listed on MSCI’s 2022 ranking of the top cross-border buyers.

The bulk of recent business from Singapore to America has been done by GIC, a global investor with diversified stakes in bonds, equities and real estate. GIC was the fourth-largest cross-border buyer of U.S. properties last year, MSCI reported.

In August 2022, GIC partnered with Florida-based Workspace Property Trust to acquire a majority stake in 53 suburban office buildings — many of them in the Atlanta, Dallas and San Francisco metro areas. The deal was valued at $1.1 billion. The Wall Street Journal reported that “Workforce and GIC are betting that demand will rise for higher-end, modern suburban offices in good locations as more companies seek out areas closer to where their employees live.”

GIC made headlines again in February 2023 when it joined with Oak Street in a $15 billion purchase of STORE Capital Corp., an Arizona-based real estate investment trust that specializes in single-tenant net-lease properties. The REIT reportedly owns about 3,000 assets across the U.S. and might be best known for its relationship with Warren Buffett, who purchased 10% of its stock in 2017. This past June, GIC continued its spree in the REIT space with an $868 million joint-venture acquisition of Indus Realty Trust. GIC and Centerbridge Partners took control of 44 industrial buildings in East Coast states.

A newly emerging participant from Singapore is GLP Capital Partners, which has some $125 billion in global assets under management. Earlier this year, it announced two separate acquisitions of Class A industrial properties in California’s Inland Empire. Late last year, GLP also finalized a $1.5 billion value-add opportunity fund for self-storage facilities. The fund’s largest transaction to date occurred in August 2022 when it nabbed 11 properties in California, Oregon and Texas.

Another Singaporean funding source, CapitaLand, owns 79 U.S. properties in markets such as Chicago, Kansas City and Raleigh. Its industrial REIT affiliate announced a $40 million deal last year to convert a San Diego office property into life-sciences space for Crinetics Pharmaceuticals. ●

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Israeli investment companies were involved in the acquisition of 89 U.S. properties in 2022 with a total value of nearly $1.5 billion. The volume spent by Israeli firms was down 5% from 2021 but still accounted for 4.2% of all cross-border investments into the U.S., according to MSCI Real Assets. And this level of activity moved Israel up to the No. 8 position among foreign investment sources into the states. The Middle East nation and longtime U.S. ally ranked 10th in 2021.

The most active Israeli commercial real estate company was Faropoint Investments, which acquired 51 U.S. properties last year, the highest number among all foreign buyers, MSCI reported. The dollar volume for these deals, however, was only good enough for 16th place on MSCI’s ranking. The Tel Aviv-based company, which has its North American headquarters in Hoboken, New Jersey (as well as other offices around the U.S.), specializes in Class B last-mile industrial properties. In 2021, Faropoint went on a major shopping spree, spending more than $700 million to acquire 148 buildings totaling nearly 9 million square feet. Most of these assets were categorized as Class B industrial.

The dealmaking continued in 2022, with Faropoint spending $59 million to acquire six warehouses in the Dallas-Fort Worth metroplex. The company also announced plans to invest $200 million in Florida during the year, including the $33 million purchase of 350,000 square feet of industrial space in Tampa and Jacksonville. Other areas of expansion for Faropoint include Chicago, Oakland, Washington, D.C., Baltimore and northern New Jersey.

Faropoint also was one of the most prolific sellers of U.S. properties last year, MSCI reported. The firm disposed of 85 properties, the second most among foreign companies. The value of these assets placed Faropoint at No. 17 on MSCI’s list of the top 20 cross-border sellers. One of Faropoint’s largest sales included a portfolio of 109 last-mile logistics facilities, which went to a private investor for $481 million. The buildings total about 6.8 million square feet and are concentrated in Atlanta, Houston, Memphis and Philadelphia.

Another major Israeli cross-border player is Migdal Insurance Co. Ltd. Israel’s largest insurance firm has been involved in various real estate sectors, including renewable power production. In February 2022, Migdal announced an expansion of its strategic partnership with Doral Renewables LLC by committing to invest an additional $75 million in the second phase of the Mammoth Solar project in northwest Indiana. Later in the year, Migdal was part of a separate agreement with Doral and Apollo Global Management to sell up to $500 million in convertible notes that will help to fund more renewable energy and storage projects.

Last year, Migdal also joined a strategic venture with White Oak Partners and BentallGreenOak to acquire high-quality, contemporary multifamily communities in suburban areas of large secondary U.S. cities. With these and other continued commitments to the U.S. commercial property market, it appears that major Israeli real estate and financial firms have not let differences between Washington, D.C., and Jerusalem impact where they buy property. ●

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Much of this direct investment goes into commercial real estate, especially in the U.S. Per figures from MSCI Real Assets, companies with Swiss connections invested $1.84 billion into American commercial properties last year. While that was down 13% compared to 2021, it was still good for fifth place among all countries for cross-border investments into the U.S. That’s familiar territory for the Swiss, who were No. 6 in 2020 and No. 7 in 2021 on MSCI’s rankings.

Two Swiss companies were among the top 20 cross-border buyers of U.S. commercial assets in 2022, according to MSCI. Stoneweg SA ranked No. 12, while UBS, which has real estate investment operations but is more prominently known as the largest private bank in the world, was 13th.

Stoneweg, in particular, has been active in the U.S. apartment sector and has its stateside multifamily operations headquartered in St. Petersburg, Florida. Its current portfolio includes more than 40 properties, many of them in large U.S. cities and their suburbs. Stoneweg’s acquisitions since October 2022 alone include 161 units in Dallas, 178 units in Cincinnati, and 348 units in Kansas City, Missouri. Prior to that, the company also deployed funds last year to secure multifamily assets in cities such as Houston, Jacksonville and Charlotte.

With commercial real estate trending downward as the calendar turned to 2023, Stoneweg has been relatively quiet so far this year. Rafael Cerezo, the company’s chief investment officer, acknowledged this past March that the environment is “very much wait and see” while adding that the market is due for a repricing. When that happens, the company will be ready, he said.

“We look to invest or anticipate market trends to offer our investors compelling returns at a period of time in products that are likely to become of significant interest to institutional buyers over the course of the next three, four, five years,” Cerezo said. “That means that we need to be at the forefront, really, of investing in new typology of assets, or assets that are going to come on trend. In the U.S., that for us means primarily focusing on the multifamily industry.”

UBS, meanwhile, recently made headlines for entirely different reasons. In March 2023, the company stepped in to buy fellow Swiss banking giant Credit Suisse, preventing its collapse after a long downward spiral. The transaction is gigantic in terms of its international finance impact, but it also has huge implications for commercial real estate as well. The new company will have more than $100 billion in combined real estate assets under management, as well as a commercial property loan portfolio of $80 billion.

Take it all together and you’ve got a major overseas player in U.S. property investment finding itself in interesting waters of late. Clearly, there remains plenty of money to be deployed via Swiss investors, who have traditionally been a shrewd and active bunch. How Switzerland’s biggest investment companies handle the navigation of these aforementioned waters will go a long way toward deciding Switzerland’s outlay into U.S. assets in 2023 and beyond. ●

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That hesitance appeared to dissipate in 2022 as Japanese investors pumped about $2.23 billion into the U.S. commercial real estate market, a 187% increase in dollar volume from the year before. The Asian nation’s investment volume accounted for 6.3% of the year’s cross-border monetary total and moved Japan from 15th position in 2021 to second place in 2022 among the countries placing capital into the U.S. Japan finished the year just ahead of South Korea’s investors but far behind the Canadian firms that claimed the top spot once again by spending more than $14.3 billion on American commercial real estate, according to MSCI Real Assets.

Japanese companies, which took part in deals involving 53 properties, were the only group among the top-five investor nations to increase their spending last year. Investors from the other top-five countries spent less in 2022, ranging from a 64% drop by South Korea to an 11% reduction by Germany.

According to MSCI, Asian countries (led by Japan) were most active in such markets as Dallas, Washington, D.C., Northern Virginia, California’s Inland Empire, San Francisco, Houston and Northern New Jersey. Japan’s top cross-border buyer last year was the Mori Trust Group, a real estate developer that began investing in the U.S. in 2015. The firm was involved in only two deals in 2022, but they were large enough to earn Mori Trust the No. 10 spot on the list of the largest cross-border buyers.

In March of last year, Mori Trust acquired Arboretum II (a pair of office buildings in the Northern Virginia city of Herndon) for $142 million. The complex totals nearly 324,000 square feet and was fully leased. In September 2022, Mori spent another $531 million on a 479,000-square-foot office building located in Washington, D.C. The deal was the largest office transaction in the nation’s capital to that point of the year. The building, located adjacent to the Walter E. Washington Convention Center and a short distance from the White House, was built in 2015 and has been awarded gold-level status with LEED, an international environmental design certification system.

The acquisition was part of Mori Trust’s “Advance 2027” plan to invest 200 billion yen (about $1.5 billion) in overseas real estate. In a press release about the acquisition, the company wrote that “people are tending to return to offices and the importance of a center office has been reconfirmed.”

Yamasa Corp., which is known for its variety of condiments for Japanese dishes, began buying single-family homes in the U.S. in 2018 and has since become a corporate player in housing markets across the country. Yamasa owns hundreds of homes in North Carolina, Texas and Arizona.

On the dispositions side of the ledger, Japan had one of the major cross-border sellers of 2022 in the Kajima Corp., one of Japan’s oldest and largest real estate developers. The company first came to the U.S. in 1964 to redevelop Little Tokyo in downtown Los Angeles. Today it is involved in building everything from automotive assembly plants to hotels. Last year, Kajima sold nine U.S. properties and ranked 16th on MCSI’s list of top cross-border sellers for 2022. ●

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This outlay constituted a staggering 40.8% of total cross-border volume in 2022 — so impressive that it’s sometimes difficult to contextualize. Consider, for example, that the second-place country (Japan) invested a paltry $2.2 billion in comparison. In fact, one could combine the deal volume of the next seven countries on the list and the output from Canadian investors would still come out on top.

After vaulting upward during the commercial-property frenzy of 2021, buyers based in Canada scaled back their spending by 48% in 2022 — not surprising because of how the real estate sector evolved as the year went on. Still, while Canada’s outlay into U.S. properties remains robust, one can’t help but note the shifting sands of the nation’s investment landscape in 2022.

For one thing, Canadian investors showed more of a domestic appetite than their historical wont. Canadian capital sources deployed more than 42% of their money within their own country’s borders last year, compared to a pre-pandemic average of 36%, MSCI reported. And while the U.S. remains the primary beneficiary of Canada’s cross-border purchases, its share of global Canadian investments has backtracked. From 2015 through 2019, spending on U.S. properties comprised nearly 40% of Canada’s global capital flow. Last year, this share slipped to 28%.

Part of the slide can be attributed to persistent weakness in the U.S. office sector. With remote work continuing to hurt office demand, MSCI reported that the dollar volume for all U.S. office transactions was sliced by 25% annually in 2022, the highest of any major asset class. A prime illustration of the Canadian pullback from the office sector came in March 2022, when Toronto-based Brookfield divested a 49% stake in One Manhattan West to Blackstone.

It will be interesting to watch Brookfield’s movements relating to the office sphere moving forward. In February 2023, a fund managed by Brookfield Properties defaulted on more than $750 million in loans on two prominent Los Angeles office towers. The default wasn’t entirely unexpected as Brookfield declared late last year that the two properties might face foreclosure.

Brookfield declined the option to extend the loan terms for one of the buildings. Preventing the other asset from default was likewise in Brookfield’s court, but in that case, the company elected to forgo required interest rate protection and the default was triggered. A report from Fortune placed the rationale behind Brookfield’s decisions squarely on waning office demand and the impact of remote work, while Real Estate Capital USA noted that the move could lead to a rise of “strategic defaults” in the future.

In response to the defaults, a special report from Barclays noted that the moves increased the risks for other loans within the same Brookfield portfolio. Certainly, office-sector observers will be on the lookout for similar actions in the near term. With the company at the apex among global commercial real estate investors, its strategy will go a long way toward defining what the 2023 office investment environment looks like. More moves like that may mean not taking Canadian investors for granted any longer. ●

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