Salute Old Glory

By: J. David Chapman/July 8, 2021

I woke up this morning after the Fourth of July holiday a bit sore and sunburned from the celebratory activities. I rode in the Edmond LibertyFest Parade on Saturday before taking the trip to Grand Lake in northeastern Oklahoma for boating and fireworks fun. The Edmond LibertyFest parade is ranked as one of the top Fourth of July parades in the U.S. I tend to be patriotic all year, but especially this time of year. The international criticism of our country bothers me and makes me wonder if it has had an impact on foreign investment in U.S. real estate.

The National Association of Realtors recently issued the association’s 2021 Commercial Real Estate International Business Trends report. If you listen to the populous press, you might believe the entire world has lost confidence in the United States and pulled investment in capital assets such as real estate. While foreign investment did decrease, it appears to have had more to do with a worldwide recession caused by the COVID-19 pandemic than a loss of confidence.

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. In the large commercial market characterized by acquisitions of at least $2.5 million, cross-border transactions 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, New York, continued to attract the most capital.

While cross-border capital inflows decreased, two positive trends emerged. The first is that even if inflows decreased, current investors did not pull out of their existing investments so that, on a new basis, the new divestment in 2019 (-$10.9 billion) reversed into a net investment in 2020 ($13.5 billion). In short, the U.S. became a global investment haven in 2020. The second positive trend is the emergence of secondary/tertiary markets in investors’ commercial portfolios. This is something to watch in cities such as Oklahoma City in the future. So salute Old Glory and know that while the national news stories present a picture that America is on her heels, investment in U.S. real estate presents an entirely different story.

J. David Chapman is an associate professor of finance and real estate at the University of Central Oklahoma (jchapman7@uco.edu).