Dallas Fort-Worth was second only to Los Angeles as the nation’s top industrial market for foreign investment in 2018, according to a new report from commercial real estate firm CBRE (NYSE: CBRE).
International buyers purchased close to $850 million in industrial real estate in Dallas-Fort Worth compared to $910 million in Los Angeles.
In North Texas’ industrial market, Chinese investors accounted for 41 percent of all foreign investment dollars and Singapore investors accounted for 34 percent. Canada came in third with 22 percent, followed by Luxembourg with 4 percent.
On a national scale, foreign investors made $14.4 billion worth of industrial real estate acquisitions and accounted for 21 percent of the country’s total real estate investment volume last year. Since 2014, there has been a 68 percent increase in the average annual volume of foreign investments in U.S. industrial real estate.
Much of the demand stems from e-commerce, said CBRE’s Jack Fraker.
“It’s created a tremendous explosion on the warehouse sector. The whole industry has changed to some sort of e-commerce or what they also call omni channel distribution model. It’s really affected everything,” he said.
Fraker, who is managing director of CBRE’s global industrial and logistics team out of the company’s Dallas office, said the industrial asset class has gained popularity among foreign investors for several reasons.
“From an investment thesis, industrial and logistics real estate has much better investment returns than some of the other asset classes because of the rapidly increasing lease rates,” he said. “The fundamentals in the United States for industrial and logistics properties have never ever been as strong as they are now.”
Along with providing stronger investment returns, industrial real estate allows overseas buyers to make investments of scale. For years, foreign investors had to purchase massive downtown skyscrapers in order to make significant investments in the U.S., but industrial real estate portfolios have changed, Fraker said.
“With these big portfolios in the logistics sector, [foreign investors] can put a lot of money to work and actually get much better returns than Manhattan office buildings, for example.”
Much of the foreign investment dollars poured into the U.S. industrial market in 2018 came from large portfolio sales, some of which ranged from $1 billion to almost $4 billion in a single portfolio sale, Fraker said.
And the flow of foreign capital won’t slow down anytime soon, especially considering the zero or negative yields from treasury instruments in other countries, he said.
“That’s why our U.S. treasuries are highly sought after. Our treasury rates on 10-year treasuries are real low,” Fraker added. “If you think about it, if you’re an overseas investor, if you can buy something in the United States and it’s a changeable, hard asset like a warehouse or an office building and then you get returns that could be 10 percent returns with modest leverage, why wouldn’t you do that versus buying treasuries in Germany or Switzerland or some place like that?”
By Claire BallorStaff Writer, Dallas Business Journa