Foreign Investment in U.S. Multifamily Hits New Highs
Cross-border multifamily investment reached new highs during 2015, with Canada leading the pack.
According to the latest data from Real Capital Analytics, foreign investment volume in U.S. multifamily properties totaled $16.3 billion during 2015 — nearly triple the 2014 total of $5.7 billion.
Foreign investment in the U.S. is expected to increase even further during 2016, in part driven by changes to the Foreign Investment in Real Property Tax Act (FIRPTA) enacted in December. The changes reduce tax obligations for non-U.S. investors investing in U.S. real estate.
Most notably, the maximum share a non-U.S. investor can now hold in a U.S. real estate investment trust (REIT) without being subject to federal obligations through FIRPTA increases from 5% to 10%. Additionally, real property interests held by qualified foreign pension funds are exempt. According to the Obama Administration, the changes are expected to not only spur investment in commercial real estate, but also the country’s aging infrastructure.
Deeper analysis of Real Capital Analytics data reveals that the top country of origin during 2015 was once again Canada, with $11.0 billion in total volume, up significantly from the $2.9 billion total during 2014.
The United Kingdom moved into the number two slot during 2015, up from seventh place, with $835.7 million in total volume, compared to $140.8 million last year.
China moved into the number three slot at $680.6 million, compared to $178.5 million in the sixth slot last year.
Real Capital Analytics data also revealed that over the past five years, Manhattan, Dallas, Atlanta, the Washington D.C. suburbs and Phoenix have been the top destinations for foreign multifamily investment.
During 2015, Manhattan was once again the top market destination, with $6.6 billion in total foreign investment volume, a significant increase over the 2014 total of $1.2 billion.
Dallas represented the second most desired market, with $1.1 billion in volume, which was up from $246.5 million last year.
Atlanta moved into the third slot during 2015 with $694.0 million in volume, after finishing 2014 in the second slot with $339.3 million.
Among other gateway markets, there was $281.5 million invested in Boston, $129.9 in Chicago, and $196.0 million in Washington, D.C.