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Cross-border investors were net sellers of US CRE in H1'19

Cross-border investors in U.S. commercial real estate became net sellers in the first half of 2019 for the first time in seven years in a warning sign for U.S. markets, Real Capital Analytics said.

Investors from all major regions of the world both bought and sold less in the second quarter, with dispositions of $13.4 billion outpacing acquisitions of $12.6 billion. The quarter's acquisition volume represented a 37% decline from the second quarter of 2018, the data provider said.

As a warning sign, the decline in acquisitions is "more of a yellow light than a red," Real Capital Analytics said in a report, because it is not a sign of a whole class of investors writing off the U.S. Instead, the firm said, the high-priced real estate transactions that such investors typically target are becoming more challenging.

Canada remained the largest source of cross-border commercial real estate investment in the U.S. over the 12 months ending in the 2019 second quarter, with $43.5 billion in inbound investment. The total was driven by Brookfield Asset Management Inc.'s acquisition of 360 properties over the period, Real Capital Analytics said. In the 2019 second quarter, however, Canadian investors completed only $3.7 billion in purchases, falling behind European investors, who invested $4.2 billion.

The busiest European investor for the first half of the year was Allianz Real Estate Holding, which agreed to purchase office space at 30 Hudson Yards in New York City in a joint venture with The Related Cos. LP.

Middle Eastern investors, despite being net sellers in the second quarter, were relatively active in 2019, with acquisitions outpacing dispositions for the first half of the year. One major purchase was the acquisition of the 711 Fifth Ave. building in New York by a group including Wafra Capital Partners Inc., a unit of the Kuwaiti pension fund, Real Capital Analytics said.