Foreign investment in U.S. commercial real estate plunged in the first half of 2019 as signs of a global economic slowdown made buyers more cautious. Deals totaled $16.9 billion, down from a record $32.7 billion in the same period last year, according to a report by CBRE Group Inc. Much of the decline was in spending on large mergers and acquisitions, which tumbled 83%, the brokerage said. Individual asset and portfolio sales fell 26%.
The current slowing economy and uncertainty over where U.S. interest rates were headed have caused many overseas investors to hesitate on deals, according to Spencer Levy, chairman of Americas research for CBRE. That may change as buyers get more clarity. “Many people have hit the pause button, but I think it’s a temporary pause button,” Levy said by phone. The Federal Reserve “has now been explicit in what their path is, and that is lowering interest rates, which will lower the cost of hedging, which will bring more money into the U.S.” Canada was the biggest foreign investor in the first half, with $5.3 billion of U.S. commercial-property deals. Following were Israel, Germany, United Arab Emirates and Bahrain, with about $1 billion each.
Levy said transactions should pick up in the second half, partly because the U.S. is still growing faster than just about any other global economy. “The relative value of the U.S. versus Europe, in particular, will become more clear,” he said. “I would not be surprised if, by the end of this year, we’re actually ahead of last year’s pace.”