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The Real Deal Los Angeles

LA bests Manhattan as top US spot for institutional capital

Equity funds surge as foreign investment dips 50% in 2017
By Natalie Hoberman | May 07, 2018 02:30PM

Los Angeles skyline (Credit: Public Domain Pictures)

In the never-ending battle between Los Angeles and New York, give another round to L.A.

The city led the nation last year with the highest level of institutional capital invested, beating perennial frontrunner Manhattan, according to a recent report from commercial brokerage CBRE.

The jump is largely attributable to a growth in investment from equity funds, which totaled roughly $6.2 billion, or 66 percent of all acquisitions last year. That’s up from just 28 percent in 2016, according to data from Real Capital Analytics.

But while equity funds flooded the market, foreign investment took a hit. The amount of foreign capital decreased by roughly 50 percent in 2017, dipping to $2 billion from $3.2 billion. In terms of total institutional capital, that translates to just 20 percent of investment last year.

In the report, CBRE says “this is not a story of government capital controls restricting outflows from China.” Yet in a report from competing brokerage Cushman & Wakefield that was published in March, Chinese investment showed a 55 percent decline in 2017, with deal volume dropping 67 percent.

Much of that decline is due to a series of capital controls imposed by the Chinese government that restrict investment in real estate and hospitality assets, the Cushman report said.

With the Chinese exiting the market, investment from Qatar took center stage with more than $500 million spent in Los Angeles, the Commercial Observer reported. Singapore, South Korea, Canada and the Netherlands followed, respectively, while China claimed eighth place.

Meanwhile, investment from sovereign wealth funds, pension funds, insurance companies and banks all declined in 2017.