COVID-related restrictions on travel, declining cap rates, and a competitive bidding environment are hindering international investment in U.S. multifamily assets. According to a new report from CBRE, international investment in U.S. multifamily assets totaled $3.2 billion for the first half of 2021, a 6.7% decrease from the first half of 2020 and a 42.8% fall from the same period in 2019.
International capital accounted for 3.6% of all U.S. multifamily investment in the first half, which is below the 2015 to 2020 average of 6.7%. CBRE’s U.S. Multifamily Investment Trends report shows that Canada was the lead source for inbound multifamily capital, with 33.3% of the total for the first half.
Saudi Arabia was the second largest capital source, with 29.3% of the international volume. In February, owner and operator Morgan Properties announced that it had partnered with Olayan America, a Saudi Arabian investment management firm, to acquire a portfolio of 48 apartment communities with 14,414 units in 11 states for $1.75 billion.
Other leading sources of inbound multifamily capital for the first half included Switzerland, Bahrain, Singapore, the United Kingdom, and Sweden.
Breaking down the buyer types, investment managers accounted for more than half, 58%, of the total inbound capital. This is primarily due to the joint venture between Morgan Properties and Olayan America. Developers and owners followed at 15.5%, and pension funds represented 4.6% of the total, a smaller share than in the past.
Several Sun Belt markets saw a good flow of international capital, with Atlanta leading the way for the first half by a wide margin. Other top markets for inbound capital include Dallas/Fort Worth; Phoenix; Baltimore; Orlando, Tampa, and Miami/South Florida; Washington, D.C.; Indianapolis; and Portland, Oregon. These 10 markets comprised 69.5% of the total inbound multifamily capital.
Garden-style assets saw the bulk of investment. According to the report, the under-performance of urban assets during the pandemic have made them less appealing for international capital. Mid-rise and high-rise assets only accounted for 26.1% of investment in the first half, down from the average of 52.8% seen between 2011 and 2020.
However, the forecast for international investment in multifamily looks to be improving for the second half of 2021. “International investment in U.S. multifamily assets is expected to increase moderately in H2 2021, aided by continued historically low hedging costs and rebounding market fundamentals in urban submarkets,” stated CBRE.
