Foreign investors have returned to US real estate, but not where they traditionally went


February 28, 2022

Nathan Florio, Partner, Risk and Financial Advisory | Deloitte DTBA
Jonathan Keith, Managing Director, Risk and Financial Advisory | Deloitte & Touche LLP
Tim Coy, Manager, Center for Financial Services | Deloitte Services LP

Investment activity in the US commercial real estate property sector surged across the finish line in 2021, increasing in volume for five of the six quarters following the onset of the pandemic. Last year’s total of nearly $809 billion1 into commercial properties exceeded the prior year by over 80% and blew past the previous record high in 2019 by 35% despite lingering uncertainty on inflation levels, supply chain constraints, reopening measures, and travel restrictions.Increasing optimism around income growth, coupled with the asset class’s stable yields, has seemingly outweighed broader economic and business concerns—bringing the US real estate sector back to the forefront of investor appetites, at least domestically.

However, foreign investors acquiring real estate properties in the US were absent from this surge through a large portion of 2020 and early 2021. Prior to the second quarter of 2020, foreign investors accounted for as much as 20% of total real estate investment activity, or $100 billion annually.3 As global investors drew their attention back to their own domestic concerns during the height of the pandemic, coupled with evolving restrictions on international travel, volumes into the United States from abroad dried up to as low as only 7% of total US real estate deal activity, a level not seen since the global financial crisis of 2007–2008.4

That story changed in the second half of 2021 as limitations on travel were lifted with the vaccine rollout and optimism around new patterns for growth bloomed. Foreign investment saw an uptick with a $53 billion bump in the second half, accounting for an overwhelming majority of the $69 billion annual total from 2021, the second strongest H2 since data began in 2001.5 The early movers have given strong momentum to the return of international investment into the United States, and their initial asset and geographic concentrations have indicated a shift in what foreign investors may be targeting going forward.


Analysis methodology

All international investment data cited in this report is based on the Deloitte Center for Financial Services’ analysis of data from Real Capital Analytics (RCA). The US real estate market, per our analysis, consists of 53 metro areas from across the country per RCA market designations.

To account for shifts in foreign-sourced property investment focuses from before and after the onset of the pandemic, volume data for property types, buyer classifications, and geographies are represented as average percentage shares of total foreign investment over defined periods of time. Reference to “pre-pandemic” is defined as the three-year average from Q2 2017 to Q1 2020, unless noted otherwise. Reference to “COVID-era” is defined as the average from Q2 2020 to present (as of this reporting, data is through Q4 2021).

What does the new age of foreign investment look like?

Industrial, multifamily properties stayed hot; retail, office spaces lost share

There has been a noticeable pattern in the recent trends of foreign investors, especially in comparison to their traditional property type preferences. On average over the past three years prior to the pandemic, foreign investors have overwhelmingly preferred office properties with more than a 38% share of total investment volumes, particularly concentrated in metro central business districts (CBDs) compared to suburban office parks at 25% to 13% respectively.As shown in figure 1, multifamily properties made up the second largest concentration on average, followed by retail, industrial, and hotel. These concentrations are a stark differential from their domestic counterparts, who overwhelmingly preferred multifamily properties followed by office, industrial, retail, and hotel.

Since the onset of the pandemic, property sector preferences for foreign investors have made four distinct shifts:

1. Inflows

  • Industrial has become the new primary target for foreign investors and grew by a sizable margin, from 15% to more than 30% of all foreign capital invested since Q2 2020.Foreign investors have chased the bustling fundamentals of this sector and the optimistic macro trends toward larger-scale last-mile distribution and just-in-time logistics demand. Per reports by CBRE, the rents in the sector have topped a record high $9.10 per square foot, and net absorption hit a 30-year annual record at 432.5 million square feet—all signals of robust demand aimed at combatting supply chain disruptions and rising costs of transportation and construction.8
  • Multifamily gained an increasing share of the pie, coming in second only to industrial at just under 30% of all capital invested from foreign entities into US commercial real estate.Foreign investors have previously targeted the sector nearly two-thirds less than domestic investors, though the shift into multifamily as of late likely comes from the added benefits of annual rent level resets as income protection during a period of high inflation and wage growth.

2. Outflows

  • Retail has made the most notable downward shift, shedding 12% from the historic average investment share, from a 17% concentration to just under 5% since the onset of the pandemic.10 While their domestic counterparts have begun their foray back into the sector, it still appears to be facing too many headwinds to draw much attention from the international community, such as long-term work-from-home and e-retail patterns, and inconsistent consumer spending in the wake of COVID-19 variants. As we spoke about in our report titled The future of shopping, the evolving implementation of experiential retail could also be a factor.
  • CBD office, which has traditionally been a favorite of international investors and has historically often consisted of trophy assets in prime CBD locations, has dropped 7% from the pre-pandemic average of 25% to 18%, the second steepest pullback behind retail.11 While traditionally offices have provided stable returns and consistent income streams, the pandemic has created a shift in work location patterns, and in turn, a shift in office property income stability.

Foreign investors follow the gateway exodus

The six major US gateway markets—Boston, Chicago, Los Angeles, New York, San Francisco, and Washington, D.C.—have, until the onset of the pandemic, historically accounted for just under 50% of all foreign investment activity into US real estate since 2001, on par with the other 47 metro areas covered in our study combined.12 This is a stark differential from domestic investor behavior, which has invested in the gateways at a 29% level since 2001. That foreign concentration in gateways has declined in recent years, down to 40% on average over the past three years prior to the pandemic.13 However, since Q2 2020 the draw toward some of the largest metropolitan areas has tapered off even further as seen in figure 2. On average, since the second quarter of 2020, gateway markets now reflect only 27% of foreign investment, with the differential shifting proportionally to the remaining primary, secondary, and tertiary markets.14

Reasons for this sudden shift include:

  • Foreign investors chasing the pandemic-era flight out of major metro areas and the de-densifying shifts in population bases. Urban cores of major metro areas notched the first annual population decline in a decade in 2020, compared to upticks in suburban migration during the onset of the pandemic.15
  • Sunbelt cities such as Dallas, Charlotte, Denver, Nashville, and Austin are drawing particular interest with high fundamental growth combined with low tax incentives.16
  • The increasing draw of asset classes that traditionally aren’t highly concentrated in many of the gateway metros, such as warehousing and distribution centers, suburban office parks, self-storage facilities, and data centers.

The sources of funding remain the same

Largely unchanged is the primary composition of foreign investor buyer types. On average, institutional investors—equity and pension funds, sovereign wealth funds, insurers, banks, and investment managers—have been the predominant sources of international capital at 63%. Since the second quarter of 2020, the composition has followed a recent upward trend to 70%, the highest concentration of institutional investors in over five years, and in line with the pre-pandemic trajectory of the sector.17 Composition shifts here have played out as expected, as these generally cash-flush investor types seemed the most prepared to deploy capital—global dry powder targeting real estate hit record highs during the pandemic at more than $400 billion.18

The larger story internationally is where these funds have originated from. As seen in figure 3, Canada has always been the largest source of foreign investment in US real estate, and given proximity to the United States and familiarity with US real estate, Canadian activity increased more than twofold. Canadian investment generally averages $13 billion annually, which accounts for about 30% of the global sources. In 2021, Canadian volumes jumped to $27 billion, a 115% increase and the highest output volume from a single country in recent memory.19 That volume increased Canada’s global share invested into the United States to 42% of all foreign investor volume, also a record.20

Other movers in the international community come from the Asia Pacific region. Investors from Singapore in 2021 exceeded their past three annual volumes into US real estate combined, topping $16 billion last year. Logistics and multifamily have been their main areas of interest. Investors from China, weighed down heavily by their own domestic, government-mandated deleveraging initiatives and industry complications from troubled property developers such as Evergrande,21 have turned away from the US market altogether for the third straight year. Prior to 2019, Chinese investors poured $5 billion annually into the US property markets, good for roughly 9% of total global funding sources.22 Over the past three years, those totals have dried up, even more so since the beginning of the pandemic. Chinese investors are yet to surpass the $1 billion invested since 2018 and notched the lowest point in recent history in 2021 at only $390 million—less than 1% of total international investment activity.23


The path forward for foreign investment

While foreign investment is flowing back into US commercial real estate, a few patterns have formed that indicate a shift in preferences after nearly two decades of generally consistent behavior. Trophy offices in New York and Los Angeles are no longer the only top targets in global investor portfolios; logistics hubs and distribution centers in cities such as Phoenix, Seattle, and Atlanta have emerged right alongside them. Institutional investors are still the leaders in the space, but early moves from Canada and Singapore are setting the stage for what the international community could be targeting in the months and years ahead.

Foreign investors are seemingly treading into new territory: unfamiliar asset classes, secondary cities—all within a fundamental environment with staying power. The US market continues to be an overwhelming leader in the global commercial real estate space and, despite a period of instability, draws in investors from abroad thanks to a wide range of assets and ease of doing business.24

Here’s what real estate firms can do to capitalize on the shift:

  • Real estate operators and developers should consider strategic partnerships with investors from abroad who are unfamiliar with running or building a specific asset class in an unfamiliar city—be the boots on the ground.
  • As international investors charge through the gates, real estate financers should continue to offer consistency in underwriting and ease of doing business that foreign investors seek specifically from the US market.
  • Advisory leaders in the US real estate community—consultants, brokers, thought leaders—have a unique opportunity to offer consistent, reliable, market insight to unfamiliar investors through the next stage of this real estate cycle, establishing long-lasting partnerships in the process.
  • Agility and flexibility were key for the earliest re-entrants targeting the US real estate market from abroad. Those already with US offices were able to avoid travel restrictions altogether. International investors should consider establishing satellite operations in the United States, or other target nations, allowing for quicker access to capital, financing, and physical assets.


Real Capital Analytics (RCA), accessed February 1, 2022.
Peter Grant, “Covid-19 fuels best-ever commercial real-estate sales,” Wall Street Journal, January 25, 2022.
RCA, accessed February 1, 2022.
CBRE, “Q4 caps record year for US industrial market,” January 25, 2022.
10 Ibid.
11 Ibid.
12 Ibid.
13 Ibid.
14 Ibid.
15 William H. Frey, “Pandemic population change across metro America: Accelerated migration, less immigration, fewer births and more deaths,” Brookings Institution, May 20, 2021.
16 Grant, “Covid-19 fuels best-ever commercial real-estate sales.”
17 RCA, accessed February 1, 2022.
18 Preqin Pro, accessed February 3, 2022.
19 RCA, accessed February 1, 2022.
20 Ibid.
21 Stephen Dover, Tim Wang, and Tracy Chen, “A tale of two real estate markets: US and China,” Talking Markets podcast, Franklin Templeton, 2021.
22 RCA, accessed February 1, 2022.
23 Ibid.
24 AFIRE, 2021 AFIRE International Investor Survey Report, May 4, 2021.

QuickLooks are regularly published articles from the Deloitte Center for Financial Services about technology, innovation, growth, regulation, and other challenges facing the industry. The views expressed in this article are those of the author and not official statements by Deloitte or any of its affiliates or member firms.

Get in touch

Nathan Florio
Partner | Risk and Financial Advisory
Deloitte DTBA

Jonathan Keith
Managing Director | Risk and Financial Advisory
Deloitte & Touche LLP

Tim Coy
Manager | Center for Financial Services
Deloitte Services LP

Fullwidth SCC. Do not delete! This box/component contains JavaScript that is needed on this page. This message will not be visible when page is activated.

Site-within-site Navigation. Do not delete! This box/component contains JavaScript that is needed on this page. This message will not be visible when page is activated.

Did you find this useful?