US a haven for global investment
By: J. David Chapman/July 7, 2022
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 Monday after returning from a weekend trip to Grand Lake. I’ve been hosting friends, oddly enough, from the United Kingdom for the celebrations. The international criticism of our country bothers me and makes me wonder if it has had an effect on foreign investment in U.S. real estate.
The National Association of Realtors recently issued the association’s 2022 Commercial Real Estate International Business Trends report. The year 2021 was a remarkable year for the commercial real estate market because it bucked expectations of a prolonged downturn. The report breaks down transactions in separate categories and defines small commercial real estate markets as those under $2.5 million and large commercial real estate market as those over $2.5 million.
While the office property market had a huge loss in office occupancy of about 143 million square feet from 2020 Q2 through December 2021, absorption (less vacancies) increased in the multifamily, industrial, and retail trade sectors. Since the pandemic, about 1 million more rental apartment units have been absorbed through December 2021. In the industrial property market, nearly 700 million square feet was absorbed since 2020 Q2 through December. Unexpectedly, the retail brick-and-mortar property market saw a positive net absorption of 48 million square feet since the pandemic, with strong absorption of neighborhood malls and strip centers that offset the declining occupancy in malls.
Meanwhile, in the “small” commercial real estate market, which is so important to those of us in Oklahoma, NAR estimates that foreign investor acquisitions of commercial real estate more than doubled from $2 billion in 2020 to $4.8 billion in 2021. Foreign buyer transactions accounted for 3.1% of the estimated commercial transactions of $155.9 billion among NAR commercial members. Florida, Texas and California were the top recipients. According to NAR, Latin Americans were the major investors.
In short, the U.S. continues to be a global investment haven. Secondary markets continue to be important in investors’ commercial portfolios. This is something to watch in cities such as OKC in the future. So, salute Old Glory and know that while 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 a professor of finance and real estate at the University of Central Oklahoma (jchapman7@uco.edu).