National Association of REALTORS®
Research Group
2023 Commercial Real Estate
International Business Trends
After a remarkable year for the commercial real estate market in 2021, the real estate
market slowed down in 2022. Uncertainty in the global market due to geopolitical risk
and rising interest rates has tapered off activity in most sectors of commercial real
estate. While the office sector remains the hardest-hit segment of the real estate
market, the multifamily and industrial sectors experienced slowing demand and rent
growth in the second half of 2022. At the end of 2022, office net absorption returned to
negative territory, and even more office spaces have become vacant. Even though the
fundamentals remain solid for the multifamily and industrial sectors, market activity
has dropped. Compared to the previous year, net absorption fell by 21% and 79% in the
industrial and multifamily sectors in 2022, respectively.
The 2023 Commercial Real Estate International Business Trends Report discusses the
trends in foreign buyer purchases of U.S. commercial real estate in 2022 in the “large
commercial real estate market,” with sales of $2.5 million or over. To do so, the National
Association of REALTORS® analyzed data published by Real Capital Analytics.
In this unprecedented era of uncertainty, foreign investments have also been
impacted. Cross-border investment activity fell by 50 percentage points to $37.2 billion
in 2022, accounting for a 5% share of total deal volume in the U.S. in 2022, down from
9% in 2021. This decrease brings 2022 cross-border sales back to the pandemic level, at
$37.0 billion in 2020. Canada remained the primary source of capital, with $15.3 billion in
sales, followed by Europe ($8.9 billion) and Asia ($7.8 billion) in 2022. Dallas, Los Angeles,
and Atlanta were the top three destinations attracting the most foreign investors in
U.S. commercial real estate as of the first quarter of 2023. Data shows that areas with
fast job growth, a strong economy, favorable demographics, and solid commercial real
estate markets mainly attract foreign investors. Parsing out by property type, most
foreign investments were made in the industrial sector (34% of all cross-border sales),
followed by apartments (27%).
However, the 2023 data indicates that cross-border activity is coming back. As of Q1
2023, the volume of cross-border investments has already increased to $43 billion – 16%
up compared to the end of 2022 - representing 7% of the total commercial real estate
transactions. This increase was mainly reflected by a $8.5 billion increase in foreign
investments from Asia in the U.S. market.
Summary
Cross-Border acquisitions in large
Commercial Real Estate Markets
Cross-border flows of $2.5M or more
dropped by 50% in 2022
Nearly half of the 2021 cross-border
acquisitions our country experienced in
2022. Although activity was near record
highs in the first half of 2022, surpassing
$78 billion, uncertainty in the global
market due to the war in Ukraine and
higher interest rates have pushed down
activity in the second half of 2022.
Specifically, according to data from Real
Capital Analytics, in 2022, the volume of
cross-border acquisitions fell by 50
percentage points to $37.2 billion
compared to $75.0 billion a year ago. That
was the lowest level of cross-border sales
volume since the first quarter of 2021.
As a result, cross-border flows accounted
for 5% of the $753.0 billion in U.S.
commercial real estate acquisitions
during 2022. This is a decrease from 9% in
2021.
The U.S. remains the most attractive
country to foreign investors
Although foreign investments slowed
down in 2022, the U.S. remains the top
destination for foreign investments
worldwide, recording the largest inward
foreign direct investments (FDI) of all
economies in 2022. According to the
latest release from the United Nations
Conference on Trade and Development
(UNCTAD), FDI flows in the U.S. fell to
$285.1 billion in 2022 from $387.8 billion
the previous year. Even with this
decrease, the U.S. continues to be the
world’s largest recipient of FDI (followed
by China with $189.1 billion), thanks to its
large consumer base, a predictable and
transparent justice system, a productive
workforce, a highly developed
infrastructure and a business
environment that fosters innovation.
Top 10 countries with the most Foreign
Direct Investments (FDI) inflows
Source: Real Capital Analytics
Volume of cross-border acquisitions
2022: $37.2B
2021: $75.0B
Source: United Nations Conference on Trade and Development
(UNCTAD)
Cross-Border acquisitions in large
Commercial Real Estate Markets
Cross-border flows at the regional
level in 2022
By region, cross-border transactions
decreased across all major regions, with
Asia experiencing the largest drop by 69
percentage points. Canada and the
Middle East followed, with activity
declining by 44 and 43 percentage
points, respectively. The volume of
cross-border acquisitions from Europe
also went down by 34 percentage
points.
Even with this decrease, Canada
remained the largest source of cross-
border acquisitions in the U.S. in 2022 at
$15.3 billion or 41% of the inflows,
followed by Europe ($8.9 billion or 24%)
and Asia ($7.8 billion or 21%).
Nevertheless, 2023 data shows that Asia
is taking over first place as the top
investor in the U.S. for the first time
since the second quarter of 2018. In the
four quarters ending in Q1 2023, cross-
border acquisitions from Asia rose to
$16.3 billion, surpassing Canada with $16
billion.
Composition of cross-border sales (2022)
Canada
41.2%
Source: Real Capital Analytics
Asia
20.9%
Europe
24.0%
Middle
East
9.3%
Rest
of
world
4.5%
Even though the United States is the country with the biggest current account
deficit, the U.S. offers the largest consumer market with a GDP of $25 trillion and solid
performance in various sectors.
Economic indicators of the top 10 countries with the most FDI inflows in 2022
Source: World Bank
Cross-border sales in Commercial Real
Estate by region as of Q1 2023
$16.2B
$16.0B
$7.4B
$3.3B
$0.4B
Top countries invested in the U.S.
Commercial Real Estate Market
Canada continued to be the largest
source of cross-border transactions
By country, despite slower activity in
2022, Canada remained the top
investor in the U.S. Commercial Real
Estate market, acquiring $16 billion in
the last four quarters ending in Q1
2023, 42% down from a year ago.
Singapore kept second place,
purchasing $10.8 billion of U.S.
commercial real estate, 35% down from
a year ago.
Japan rose to third place (#4 in 2022)
with $2.9 billion in acquisitions, 175% up
from the previous year.
Switzerland reached fourth place (#6 in
2022), purchasing $2.3 billion of
commercial real estate in the U.S. That
was a 20% increase compared to the
volume a year ago.
Finally, South Korea went down to fifth
place (#3 in 2022) as the acquisition
volume fell by 65% from a year ago to
$2.2 billion in the first quarter of 2023.
Other countries that invested at least
$1 billion dollars were Spain ($1.8
billion), Bahrain ($1.6 billion) and Israel
($1.4 billion).
Top countries invested in U.S.
Commercial Real Estate as of Q1 2023
Source: Real Capital Analytics
Metro areas attracting most foreign
investors
Non-major metros attracted more
foreign investors in commercial real
estate
The volume of cross-border acquisitions
in non-major metro areas ($25.2 billion)
is more than twice the volume in major
metro areas ($12.0 billion). Nevertheless,
considering that the total transaction
volume (both domestic and cross-
border) is higher in non-major metros,
the share of cross-border acquisitions
was 5.7% in the major metros compared
to 4.6% in non-major metros.
At the local level, Dallas, Los Angeles,
and Atlanta were the top three
destinations attracting the most foreign
investors of U.S. commercial real estate
as of the first quarter of 2023.
In Dallas, the volume of cross-border
sales was $2.6 billion during the last four
quarters ending in Q1 2023, representing
6% of all foreign investments in U.S.
commercial real estate. Purchases from
Canada exceeded the $1 billion dollars in
the Dallas market. A strong commercial
real estate market (compared to the
national level) is one of the primary
factors that many foreign investors are
attracted to in this area. Specifically,
demand for space across every sector of
commercial real estate (office,
multifamily, retail, and industrial) is
larger in Dallas than at the national level.
In addition, a strong economy coupled
with favorable demographics are a
couple of other factors that attract
foreign investors to the Dallas metro
area.
Foreign investments rose substantially in
the Los Angeles metro area. Los Angeles
jumped to the second place (#7 in 2022),
as the sales volume increased to $2.5
billion, nearly 30% up from a year ago.
Top markets most attractive to foreign
investors as of Q1 2023
Source: Real Capital Analytics
More than half of these transactions ($1.3
billion) were made by Asian investors. Los
Angeles surpassed New York for the top
U.S. areas for foreign real estate
investments. Foreign investors are
attracted to the Southern California region
for a number of reasons, including strong
economic growth and a rising household
income.
Although sales volume dropped by 51
percentage points compared to the
previous year, Atlanta was able to keep
third place with $1.8 billion in foreign
investments in the commercial real estate
market.
Metro areas attracting most foreign
investors
Data shows foreign investors are attracted to areas with fast job growth, a strong
economy, favorable demographics, solid commercial real estate market
fundamentals, and low cap rates. Most of the areas with the most foreign
investments, as of Q1 2023, outperformed compared to the national level in the
following ten indicators.
Statistics on the top 10 markets attracting most foreign investors
Source: ACS, U.S Bureau of Labor Statistics data, CoStar, BEA
Types of properties purchased by foreign
investors
Industrial spaces continue to attract
most foreign investors
While cross-border sales volume has
decreased in all types of properties,
data shows that the industrial market
continued to represent the largest
share of acquisitions, totaling $12.6
billion or 34% of the total foreign
transactions ($37.2 billion) in 2022.
Apartments are the second most
favorite type of property that foreign
investors purchase. In 2022, apartment
acquisitions made up 27% of all cross-
border transactions ($10.0 billion).
Although the office sector continues to
suffer from the slow return to office
transition with negative net absorption
and record-high vacancy rates, office
acquisitions represented 18% or $6.8
billion of all cross-border sales, the third
largest property type.
Nevertheless, in 2023, data shows an
impressive increase in demand for
retail spaces. During the last four
quarters ending in Q1 2023, the volume
of retail transactions rose substantially
to $8.4 billion from $1.3 billion the
previous quarter. As a result, as of Q1
2023, retail properties made up the
third largest share of cross-border sales
(surpassing office properties),
representing 19% of all sales.
Acquisitions of foreign investors by
property type as of Q1 2023
$13B
$10B
$8B
$5B
Source: Real Capital Analytics
Share of cross-border transactions by
property type
31%
24%
19%
12%
11%
Source: Real Capital Analytics
Cap rates of cross-border purchases and
sales by capital group
Cross-border property transactions had
lower cap rates
Foreign investors are purchasing high-
value properties compared to the total
market acquisitions. The average cap rates
of foreign investor acquisitions across
nearly all types of properties (office sub,
industrial, retail, and apartment
properties) were lower than those of the
total market. Specifically, the cross-border
industrial transactions had the lowest cap
rate at 4.6%. Meanwhile, lower cap rates
usually indicate high-value properties,
primarily suitable for investors seeking
lower risk. Only in the office sector in the
big city centers cross-border cap rates
were higher than those of the overall
market.
Institutional investors accounted for
65% of acquisitions in 2022
In large commercial markets, foreign
institutional investors represent the
largest group of cross-border transactions,
purchasing $24.3 billion or 65% of the total
$37.2 billion in cross-border flows.
Professional fund managers were the
largest investor group, at $14.6 billion in
investments (60%), followed by pension
and sovereign wealth funds at $5.1 billion
(21%). Banks/finance and insurance
companies accounted for the remainder
of 19%.
Meanwhile, data shows that the presence
of institutional investors in cross-border
investments is growing even further in
2023. During the last four quarters ending
in Q1 2023, the share of institutional
investors rose to 73%. Pension and
sovereign wealth funds took the first place
with $15.1 billion, surpassing the
investments from professional fund
managers ($14.5 billion).
Cap rates of cross-border versus total
market acquisitions
Cross-border transactions by type of
investor until Q1 2023
Office
CBD
Office
Sub
Industrial
Retail
Apartment
Source: Real Capital Analytics
$32B
$8B
$2B
$1B
Composition of cross-border institutional
investors until Q1 2023
48%
46%
4%
3%
Source: Real Capital Analytics
Source: Real Capital Analytics
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