HOUSTON – (By Dale King, Realty News Report) – The coronavirus pandemic has taken a chunk out of another American real estate market. But Texas was still able to find some good in the depressing numbers
CBRE’s U.S. Multifamily Inbound Investment Trends report for the first half of 2020 says global spending in the U.S. multifamily sector decreased by 49.2% year-over-year from the first half of 2019. Outside-the-U.S. investors purchased $3.1 billion in multifamily property during the first six months of 2020.
Still, data in the report rank the Dallas/Fort Worth market fifth in the nation with $2.8 billion in global capital investments. Austin came in ninth with $2.1 billion and Houston ranked 10th with $2.0 billion.
Rankings are based on inbound global capital, measured by investment volume from 2015 to the first half of 2020.
“Texas is the only U.S. state with three markets ranked among top global investment markets for multifamily product,” the CBRE study says.
What happened around the world in the second quarter of 2020 – lockdown measures and market uncertainty caused by the COVID-19 crisis – “weighed on investment activity,” said CBRE. Q2 volume fell nearly 80% year-over-year, accounting for most of the decline for the first half of 2020.
COVID slugged the real estate market and virtually all other areas of the economy with “limits to international travel, difficulty in conducting due diligence and declines in occupancy and rent levels” in the second quarter.
Canada, the perennial leader in U.S. inbound capital, accounted for more than half of global multifamily investment volume during the first half of 2020, contributing 52%. Second was Denmark, 17%; Israel third, 12%; Switzerland, fourth at 6%; United Kingdom, fifth at 5%; “other,” sixth at 6% and Japan, seventh at 3%.
New York City was the only market with year-over-year growth in global investments, rocketing to a 641% increase. However, says the report, this was largely the result of two megadeals totaling $827 million. Tampa at minus-28%; Phoenix at minus-29%; Los Angeles at minus-55% and Austin at minus-69% were the next best performers.
Top 10 U.S. markets for global investments in rental property were: New York, Los Angeles, Atlanta, Washington, D.C., Dallas/Fort Worth, Phoenix; Boston, San Francisco, Austin and Houston.
CBRE reported other observations about global multifamily investors:
- Investment managers were the largest buyers, accounting for 35% of global investment in U.S. multifamily assets in first half of 2020. Institutional buyers took a 26% share while property companies accounted for 19%. Property companies include public and private developers, owners, operators and asset managers. Institutional includes pension funds, insurance companies and sovereign wealth funds.
- Global investors prefer large assets. Nearly half of cross-border capital to the U.S. multifamily sector in the first half of 2020 was for assets priced at more than $200 million. Global investors also overwhelmingly preferred mid/high-rise assets over garden properties (79% vs. 21% share).
- Despite less demand from foreign investors due to the current downturn, low hedging costs in the U.S. should help accelerate multifamily sales as deal activity increases.