US commercial real estate leads global market

US commercial real estate leads global market

The commercial property sector was one of the hardest hit by the pandemic in 2020 with transactions falling by as much as 20%. However, there are signs of recovery and in 2021, US commercial real estate leads the global market. New York City takes the top position and is joined by 15 other US metros in the world’s top 30 markets.

NYC largest commercial market

According to the 2021 Commercial International Real Estate Business Trends Report compiled by the National Association of Realtors (NAR), New York City continues to rank as the largest commercial property market in the world. It accounts for US$28.5 billion of the global total.

Joining the Big Apple are 15 other US metros. They include Los Angeles (in second place), San Francisco (in fifth position), Dallas, Miami and Chicago. US commercial real estate dominates the top five positions with Paris and London in third and fourth places respectively.

All 30 largest markets saw investment scale back in 2020 compared to 2019. New York had one of the largest reductions falling by over 40% on 2019’s figures. The only exception was the Raleigh/Durham metro area where investment in commercial real estate rose marginally in 2020.

Foreign investors in US commercial real estate

The report also looked at the origin of investment in commercial property in the US. As is the case with US residential real estate, Canadian commercial buyers represent the lion’s share. They invested the largest amount with a total of US$12.4 billion, a figure slightly below investment in 2019.

South Korean and German investors were the next two largest, although both lie some distance from the Canadians. South Koreans invested US$5.2 billion in 2020 (up over 102%) and the Germans, US$4 billion.

The majority of foreign capital fell in 2020 although several countries increased their stake in US commercial real estate. As well as the huge increase from South Korea, Swedish investors upped their capital by 63%. On a smaller scale, Singapore and French investment went up by 18% while that from the UK rose by 15%.

Commercial property preferences

Foreign investment in US commercial real estate shifted in 2020 with multifamily residential property and industrial real estate the preferred types. According to the NAR report, foreign investment in industrial property equalled 31% last year. Multifamily accounted for 27% of the market share.

Perhaps unsurprisingly given the pandemic, there was a marked shift away from office and retail property. Industrial has taken over from retail as a favourite and foreign investment in US retail property has fallen steadily since 2018.

Optimism for the near future

The NAR report also asked members to give their opinion on the future of US commercial real estate for foreign investors. 78% said that they remained confident that their international business would return to pre-pandemic levels over the next two years.

17% expect a recovery this year and 19% prefer to place their optimism in 2022. However, the vast majority agree that the impact of the pandemic on commercial property is temporary and expect the US to remain at the top of global preferences in the near future.

(Source: NAR)