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Tuesday, January 14, 2014

Foreign Investment in U.S. Industrial Soars 127%

by Erik Foster, Chicago

Foreign investors spent $2.64 billion buying distribution, warehouse and manufacturing buildings in the United States in 2013, the highest investment total since the beginning of the recession in 2007. Accordingly, U.S. industrial sales volume has increased 127.6% since 2011, with Canadian investors spending more than all other foreign investors combined.  These are among the key findings of a white paper I recently wrote on foreign investment in U.S. industrial real estate markets.

A couple of highlights of the report:

  • During each of the years from 2011 to 2013, investment from Canada was higher than the total spent by all other countries combined.
  • Investors from Canada, Australia, Germany, South Korea, the United Kingdom, and other countries are buying industrial assets in all major U.S. markets, seeking stable cash flow and the opportunity to increase long-term value through the potential for higher rental rates.
  • The assets purchased represent a range of asset types, yet most are distribution properties in major markets, through different investment vehicles, funds, etc.

Some predictions for 2014:

  • As vacancy rates move below 10% in many core markets and new construction remains minimal (at almost 1/3 of the volume as the 2007 peak), limited supply and strong demand will likely drive rents upward during 2014. This bodes well for investors who want to increase value through rental appreciation, so be on the lookout for a voracious appetite for buildings with leases signed in 2009 in tight markets!  
  • Also, investors will continue to shift to secondary markets, such as Indianapolis, Columbus and Memphis, for more better yields and a chance to gain a foothold into these growing markets given their logistics prowess.

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