According to CBRE, international investors bought $3.2 billion of U.S. multifamily assets in H1 2021 – 6.7% below the comparable period in 2020 – amid COVID-related travel restrictions, declining cap rates and a competitive bidding environment.
CBRE further reports international capital accounted for a modest 3.6% of all U.S. multifamily investment in H1 2021–below the 2015-2020 average of 6.7%.
COVID-related restrictions on travel, declining cap rates and a competitive bidding environment were headwinds to international investment in H1 2021. In addition, the under-performance of urban assets made them less appealing to international capital. Conversely, low hedging costs helped make offshore capital more competitive.
Canada was the lead country source for U.S. inbound multifamily capital, with 33.3% of the H1 2021 total. Saudi Arabia was the second-largest capital source, with 29.3% of the international volume. Olayan Group, a Saudi Arabian investment management firm, partnered with Morgan Properties on the Star Real Estate Ventures portfolio acquisition of 50 properties reportedly valued at $1.75 billion. Switzerland, Bahrain, Singapore, the United Kingdom and Sweden were the other leading country sources of U.S. inbound multifamily capital.
Investment managers accounted for 58% of total inbound capital in H1–due largely to the Morgan/Olayan JV portfolio acquisition–followed by developers/owners at 15.5%. Pension funds represented only 4.6% of the total, a much smaller share than usual.
Atlanta was the leading metro destination for international capital in H1 by a wide margin, followed by Dallas/Ft. Worth, Phoenix, Baltimore, Orlando, Tampa, Miami/South Florida, Washington, D.C., Indianapolis and Portland. Offshore capital in these 10 markets together comprised 69.5% of total international multifamily volume.
Mid-/high-rise assets accounted for only 26% of H1 investment, half of the 2011-2020 average of 52.8%. This reflects the challenges faced by urban multifamily amid the COVID pandemic.
Acquisitions of assets priced at $100+ million was 39.9% of the H1 total, well above domestic capital’s 24.4% share. Acquisitions of assets priced between $50 and $100 million totaled 45.3%, also considerably higher than domestic capital (31.6% share).
International investment in U.S. multifamily assets is expected to increase moderately in H2 2021, aided by continued historically low hedging costs, rebounding market fundamentals in urban submarkets and easing of international travel restrictions, concludes CBRE.