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.17Composition 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.19That 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,21have 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.22Over 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
