Foreign Appetite for US Properties Rebounds in November
Both foreign and domestic investors are returning to the market, with inquires hitting 90% of pre-pandemic levels.
Saudi Arabia-based Sidra Capital has acquired a 90% stake in Arborcrest Corporate Campus, a five-building, 855,600-square-foot suburban office campus in Philadelphia with a strong concentration of life science tenants. JLL Capital Markets, which facilitated the $225 million recapitalization, says the deal is a prime example of increased foreign investment, particularly from Middle Eastern capital, in US life science properties.
The transaction is also illustrative of a rebound in investment appetite from global investors in October and November, which CBRE describes in a new report. It says that investor inquires reached 90% of pre-pandemic levels by mid-October after bottoming to record lows in the second quarter.
Both foreign and domestic investors drove the increase in activity. Foreign investors are targeting the US due to the relative resilience of the economy during the pandemic and for higher rates of return. Korea and Singapore have been first countries to rebound, a surprising event considering ongoing travel restrictions that prevent any in-person property tours, CBRE says. In the third quarter, Asia Pacific transaction volumes increased 44%, a total of $26 billion, led by Korea. Year-to-date transaction volumes are down 30%, however.
Asia-Pacific buyers led the increase in transaction, but European buyers led for total investment volume with a total of $58 billion in investment activity in the third quarter. Investment from Europe is down 37% for the year.
As global investment capital has rebounded, new trends have emerged. Rather than the traditional gateway and high-density markets like San Francisco and New York, foreign buyers are instead focused on growth and pro-business markets, including Miami, Dallas and Boston.
Foreign buyers are also targeting asset classes that have proven resiliency through the pandemic. Multifamily and industrial are still the most sought-after properties, but alternative asset classes like data centers, life sciences and medical office have jumped to the top of the list as well. Hotel demand has also rebounded, thanks largely to a narrowing pricing gap between buyers and sellers.
The strong demand for alternative assets underscores the significance of the Sidra Capital life science deal in Philadelphia. The CBRE report notes that many of these properties are small, limiting the investment opportunities for institutional investors. However, according to data from JLL, Middle Eastern capital has dominated life science activity in 2020, accounting for $389.2 million in total investment volume year-to-date. As a result, the life science market is on track to outperform initial expectations this year.