LA’s industrial market is tops among foreign investors in US: report

Overseas stakes in Greater L.A., New York, Chicago and Miami were all strong in 2018
By Gregory Cornfield | April 23, 2019 08:00AM

Investments from overseas almost tripled last year in Greater Los Angeles (Credit: iStock)

The Los Angeles area industrial market is still having its moment, and the draw isn’t just from U.S. investors. China and Canada are also big buyers. Industrial investment from China and Canada reached an all-time high in the U.S., accounting for 70 percent of 2018’s total foreign investment.

Total foreign investment almost tripled last year in the L.A., Orange County and Inland Empire industrial market, crowning the region No. 1 in the U.S., according to a report from CBRE and Real Capital Analytics.

The top five U.S. markets for industrial real estate last year were: L.A. with $910 million; Dallas/Ft. Worth with $849 million; Chicago with $618 million; Atlanta with $475 million; and New York City with $414 million. Miami was out of the top 5, but still saw $330 million in overseas investment.

The numbers are a marked shift from foreign real estate investment broadly, which last year moved away from soaring commercial and residential prices in New York City, Chicago, Miami and Los Angeles. Foreign investors were chasing higher yields in unexpected secondary markets with stronger growth potential.

China has been on a selling spree when it comes to commercial real estate in the U.S.

But the industrial sector has been different.

Demand for warehouse, data center and distribution space in the U.S. — which hit an 18-year high last year — has been driven by the continued rise of e-commerce. Of the largest 100 industrial leases in the country in 2018, 61 were signed by e-commerce companies and logistics firms, for a total of 61.5 million square feet.

In all last year, foreign investors shelled out $14.4-billion for industrial real estate nationwide, up more than 150 percent compared to 2017, according to the CBRE/RCA report. Foreign investors accounted for 21 percent of total U.S. industrial real estate investment volume last year.

And since 2010, those investors have poured more than $52 billion into industrial assets nationwide.

In Chicago’s hot industrial market, vacancy rates dropped to a 17-year low last year, but with 19.5 million square feet of industrial space in the pipeline, the city has hit a point where leaders are starting to worry they might overbuild.

In New York City, the average price per square foot for industrial space grew by as much as 81 percent in some areas.

Inland Empire was the top market in the nation for major warehouse leases last year with 20 of the top 100 deals.