June 5, 2017

As we all have experienced and have been talking about, the financial markets have been bumpy over the last 24+ months, with the initial trigger being the slowdown in emerging markets (notably, China) in August of 2015.

Since then, we have seen investor sentiment shift from cautiously optimistic, to cautious, to uncertain, but over the last three quarters, we have started to see volatility levels normalize and the reemergence of cautious optimism.

And with that a couple of things have become clearer: the cycle is holding strong, but capital in U.S. commercial real estate is becoming more selective. That does not mean investors aren’t finding opportunities. However, more of these opportunities are in the form of structured, entity-level transactions as opposed to single assets sales, which have broadly driven the markets this expansion.

This selectivity is most notable in the office and retail sectors, where some pricing gaps have emerged.

Though offshore capital levels remain elevated in the U.S., these groups remain focused on primary markets like Washington, DC, New York, Boston, Chicago and Los Angeles where more than US$4 billion of combined office assets were acquired by offshore buyers in the first quarter of 2017, and still seek Class A office, trophy hotel, flagship retail and, increasingly, multifamily assets.

Asian capital continues to have an outsized impact on the U.S. market with nearly US$50 billion of direct investments from Asian capital sources since 2013. In 2016, Asian capital represented 43.4 percent of annual inbound capital flows and rose to 64.2 percent in 2017. These capital flows are validating the global focus on the U.S. market.

The Americas region continues to benefit from this focus, seeing US$58.2 billion of first quarter transaction volumes. After seeing US$17.2 billion of net new foreign investment in us real estate in 2016, the Americas region maintain this momentum with US$6.0 billion in the first quarter. The

United States comprised 11 of the 20 most active markets globally. As we look ahead, selectivity and continued uncertainty will impact activity levels in 2017 as well as pricing in less liquid segments of markets, but sustained strength in U.S. fundamentals will continue to present accretive risk-adjusted opportunities for varied sources of capital.

You may be interested in Asia Pacific Market Perspective Q2 2017 as well.


Jonathan Geanakos

President, Americas Capital Markets, JLL

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