As the pandemic took hold across the globe, we saw the amount of foreign investment in U.S. real estate plummet. Of course, given the various travel bans and restrictions this was completely expected. However, as COVID-related travel restrictions began to lift last year, we saw foreign investors flock back to the U.S. housing market. This demand was so strong that we saw foreign investments exceed pre-pandemic levels in 2021. In fact, foreign investors purchased $70.8 billion of U.S. commercial real estate in 2021. This level surpassed that seen in 2019 and was the highest since 2018’s $94.6 billion.
Which countries led the way?
According to data from Real Capital Analytics, the countries most represented in international U.S. commercial investments in 2021 were:
- Canada
- Singapore
- South Korea
- United Kingdom
The impact of Russian sanctions
The recent Russian invasion of Ukraine has certainly sparked worldwide condemnation resulting in sanctions on the Russian elite. Given the economic impact of these sanctions, we will likely see less Russian real estate investors in the U.S. Overall, Russian investors do not comprise a very large percentage of foreign buyers in the U.S. though.
In South Florida, we do have a few markets that have historically been popular with Russian buyers however. For example, Sunny Isles, FL is known as “Little Moscow” or “Moscow by the Sea”. This market has been well known as a hotbed for Russian investors to purchase luxury properties in the area. Although we will likely see some impact from the Russian sanctions in this market, it will likely be isolated to certain areas.
Summary
Overall, the volume of foreign investments in U.S. real estate has bounced back considerably since the start of the pandemic. Interestingly, we are seeing a shift in the type of real estate being targeted now though. Historically, foreign investors targeted sectors such as hotels & office buildings in major cities such as New York, Chicago, & San Francisco. In 2021, we saw a shift to growing sectors like warehouses, rental apartments and specialized office buildings for pharmaceutical businesses. In addition, we are also seeing increased interest in other low-tax, high-growth markets.
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