Foreign investors are increasing industrial investment activity in Southern California. After research by JLLIndustrial purchases represented 52% of all foreign investment in Orange County in the past 24 months. Foreign investors have acquired 5.4 million square meters of commercial real estate in the market. The trend is directly related to the growth of e-commerce in this cycle, which has increased the industrial appetite for domestic and foreign sources of capital.
"Over the past 10 years, industrial property has become an increasingly popular asset class in the United States, targeting both domestic and foreign capital as the industry becomes more institutionalized." Steve Wagner, CEO at JLL, tells GlobeSt.com. “As consumer habits change and warehouses in densely populated areas become more valuable to the business model of American companies, markets like Southern California continue to lead. Foreign investors are drawn to the US, and southern California in particular, because of the strong economy and long-term growth prospects. Put simply, Southern California industry is a much better alternative to many other investment opportunities that foreign capital might consider. "
Foreign investment in industry increased in 2018. Canada, China, Germany, Singapore, and Japan were the most active foreign investors, in that order. The presence of these aggressive buyers has changed the dynamics of the industrial market. “It made an already competitive market so much more competitive,” says Wagner. "So Cal Industrial attracts foreign buyers and domestic investors are drawn to it for the same reasons."
In line with the demand for storage space, foreign capital is playing in the big box market, buying more than 100,000 square meters of equipment. Recently, however, foreign capital has also become active in small box institutions. "Individual foreign investors have a very great appetite for smaller industrial properties, either for their own business use or as an investment," says Wagner. "Internationally recognized locations tend to see strong demand from such buyers."
With a conservative but positive economic outlook and healthy consumer spending, foreign appetites are likely to remain strong. “I think the demand will continue. With economies slowing down in many other countries, Southern California continues to be targeted as a sales alternative for capital employed, ”says Wagner. "This means that the competition for quality goods will continue."