The impact of foreign investment on the U.S. Skyline

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The skylines of the U.S.’ great gateway cities have always been a welcome sight to those looking to make their mark in the land of opportunity.

And although they’ve evolved over the years, these skylines still have a special draw for investors looking for a good home for their money.

Foreign investors now represent two of every five dollars invested in U.S. Skyline property, according to JLL’s recently released 2015 Digital Skyline. Those cross-border dollars invested in 2014 represented more than 150 percent growth from 2013 into the Trophy and Class A properties where investors and tenants alike tend to focus their demand.

The overwhelming majority of this capital is being invested in premier coastal hubs like New York, San Francisco, Boston, Seattle and Washington, D.C. Indeed, of the $12.1 billion in foreign real estate investments made in 2014, JLL shows $11.3 billion settled in these cities.

Foreign investment, while increasing in the skylines of gateway cities like New York, Chicago and San Francisco, does not currently factor into San Diego’s skyline investment activity because lower building values as compared to major gateway cities make it less efficient for foreign investors to deploy larger sums of capital of greater than $100 million. Bob Prendergast, managing director for JLL’s San Diego capital markets team, says, “The size of investment in San Diego tends to be less than $100 million. Many of the international investors are looking to invest larger sums of money and the majority of the individual property sales in San Diego are less than $50 million.”

During 2014, four international buyers entered the San Diego market—one from Turkey, two from Canada and one from Mexico—but the acquisitions were made countywide and not in the skyline. However, Lynn LaChapelle, managing director for JLL San Diego’s capital markets team, adds, “The pace of investing in San Diego has remained consistent year-over-year from 2014 into 2015, and sentiment remains very positive.”

 

With international interest in traditional and emerging hotspots growing, JLL predicts foreign buyers will invest at least $50 billion into the U.S. Skyline in 2015, – and the numbers are expected to continue climbing. If domestic investors want to compete with the wave of capital that’s coming, they’ll need to evolve their strategies in the years to come by partnering with their foreign brethren and diversifying into non-core and non-Central Business District assets.

Visit JLL’s Digital Skyline today to learn more about foreign investment trends and how they are shaping the U.S. Skyline.

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