'Seas the Money: U.S. Investors weigh Risks and Returns when considering Overseas Investments'

JULY 2024

U.S. investors generally allocate the majority of the commercial real estate investment capital toward investments within the United States. And when they do invest overseas, they often focus on higher-return investments, with less interest in non-U.S. core properties. There are other advantages for a global real estate portfolio, such as the security that comes from a diversified investment approach. But there also are risks, as overseas investments bring investors into contact with different regulatory regimes and currencies.

Given the size of their home market, it may be no surprise U.S.-based institutional investors typically prefer to invest domestically. And that trend was intensified in the post-pandemic era, as the high cost of capital has made accessing international markets even more challenging.

Cross-regional outflows from North American investors to Europe and Asia Pacific were $14.3 billion in the second half of 2023, according to CBRE Research’s analysis of MSCI Real Assets data, down 51 percent year-over-year. First-half 2023 outflows were even lower, at $13.5 billion, down 67 percent from the same period of 2022 (see chart on page 33).

However, the time may be ripe for U.S. investors to consider investing internationally. Real estate and economic trends in Europe and Asia Pacific suggest opportunities may exist outside the United States for commercial real estate investment. The 2024 Institutional Investors Real Estate Trends report on the results of the annual survey of investors’ intentions conducted by Institutional Real Estate, Inc. indicates an increase in the attractiveness of international real estate, although U.S. investors do continue to rank their home market as the most attractive (see chart on page 35). U.S.-based investors also gave high marks to the United Kingdom, Canada, Japan and Australia.

The survey’s findings on U.S. investor preference for their domestic real estate market match what Tricia Peterson, managing partner with Accord Group, has seen. “In general, we are finding that U.S. investors are focused on the U.S. market and believe that there are enough opportunities to invest in the domestic market and generate strong risk-adjusted returns,” says Peterson.

Another challenge for U.S. investors considering investing overseas is their legacy international investment portfolio. “We have also heard that some investors find themselves overallocated to Europe at this point,” adds Peterson, “so, while they are not likely reducing their allocations, they are not planning to add exposure to this market.”

To read the full article, click here.

ABOUT ACCORD CAPITAL PARTNERS LLC

Accord, through its affiliates, is a global capital advisor, principal investor and investment manager. With its headquarters in San Francisco and personnel in Chicago, London, Hong Kong and Seoul, Accord engages with a wide variety of participants in the real estate private equity industry. Accord Capital Partners, its broker/dealer affiliate, provides advisory and capital raising services in the United States. Accord Europe Limited, its broker/dealer affiliate, provides advisory and capital raising services in the United Kingdom and Europe. For further information on Accord, visit: www.accord-group.net.