Asian investors are on track for a record annual spend on US multifamily assets this year.
Research from CBRE found that $522m (€412m) of multifamily transactions by Asian buyers closed between January and August. The figure is almost as much as was invested in all of 2013 ($537m).
“The jump in buying activity by Asian investors, particularly from Japan and China, is the most significant shift in terms of buyer nationality in 2014,” CBRE said.
Asian investors accounted for 18% of cross-regional multifamily investment in the US as purchases by European and Middle Eastern countries decline. Canada remains the top foreign multifamily investor in the US.
San Francisco attracted the most investment, with more than $326m, followed by Los Angeles ($252m) and New York ($175m).
Peter Donovan, senior managing director of multifamily at CBRE, said Asian investors are attracted to markets where fellow nationals are likely to live, and to US metropolitan areas that “closely mirror the investment conditions found in major Asian cities such as Beijing or Hong Kong”.
He added: “This makes densely populated urban centres such as San Francisco, Los Angeles and New York obvious choices.”
Donovan’s observations echo those of Hu Yan, who earlier this year told IP Real Estate that investors tended to follow migration.
Donovan added that Asian investors were also considering multifamily opportunities in Seattle, Salt Lake City, Jacksonville, and South Florida, targeting areas surrounding universities or other enclaves that attract a “disproportionate number of Chinese nationals”.
Asian investors, CBRE found, have been focused on single assets, with just one of the 27 multifamily deals in the first eight months of this year being a portfolio.
This week, a report into real estate trends by PwC and ULI noted that for high-end multifamily, nearly half of respondents to its survey consider it smart to divest next year, while 30% consider it worthwhile to hold for a longer period. Only 21% feel now is a good time to buy.
However, for multifamily assets aimed at more moderate income levels, the relationship was reversed, with only 28% recommending a sale. Holding and acquisition are more attractive, with 37% and 35% respectively recommending the strategies in the year ahead.
Demand for moderate apartments is “very good”, with one respondent noting “terrific opportunities” to buy value-add multifamily, suggesting purchasing “B” buildings in “A” markets.
“The thinking is that such properties can be repositioned and that the overheated luxury market exerts upward pressure on even more modest rentals,” PwC/ULI said.
“Yes, supply is still on the rise, but that, too, is tiered, and a disproportionate share of new construction is at the high end.”