Asian Investors Increase Their Appetite for US Multifamily

Asian investors are poised to spend more on U.S. multifamily assets in 2014 than at any other time in history, according to a recent report by CBRE.

Los Angeles—Asian investors are poised to spend more on U.S. multifamily assets in 2014 than at any other time in history, according to a recent report by CBRE. So far—January through August—investors from Asia have spent $522 million on such assets, says the report, a total that’s already far surpassed the total for 2012 ($356 million) and is close to bettering the 2013 total of $537 million.

The jump in buying activity by Asian investors, particularly from Japan and China, is the most significant shift in terms of buyer nationality in 2014, the report notes. Asian investors are now responsible for 18 percent of cross-regional multifamily investment in the United States—an increase of 8 percentage points—as purchases by European and Middle Eastern countries decline slightly. Canada continues to be the overall leader in foreign multifamily investment into the United States.

Many of the Asian-investor buys are concentrated in a few major markets. Since January 2013, San Francisco has attracting the most investment capital from Asia, at more than $326 million, followed by Los Angeles at $252 million and New York at $175 million. Asian investors tend to focus on single assets, with just one of the 27 multifamily acquisitions since early 2013 being a portfolio, compared to investors from the rest of the world, who made at least 20 percent of their acquisitions in portfolio assets, according to the CBRE.

CBRE senior managing director, multifamily Peter Donovan explains that Asian investors are attracted to markets where fellow nationals are likely to live, and to U.S. metros that closely mirror the investment conditions found in major Asian cities such as Beijing or Hong Kong. That makes densely populated urban centers such as San Francisco, Los Angeles and New York obvious choices.

Asian investors are also considering multifamily opportunities in markets such as Seattle, Salt Lake City, Jacksonville and South Florida, the report says. The strategy in those markets is to target areas surrounding universities or other enclaves that attract a disproportionate number of Chinese nationals, whom developers believe can be enticed as potential tenants or investment buyers of condo units.

Cross-border buyers overall have targeted a range of multifamily assets in U.S. locations since January 2013, with two Texas metros ranked in the top three of investment destinations. Houston attracted the biggest concentration of cross-border investment at more than $758 million in that period, followed by Washington, D.C., at $703 million and Dallas at $649 million.

The majority of cross-border multifamily investment to date in 2014 has been made in primary and secondary metros. That’s in contrast to 2013, when secondary and tertiary metro acquisitions dominated the first eight months of the year (40 percent in Texas metros). Cross-border investors have preferred purchasing newly built core/core-plus product in 2014, CBRE explains, compared to a significantly greater focus on slightly older core-plus/value-add product in 2013.