Uptick in M&A Activity Boosts Capital Flow to US

The CBRE study found that inbound capital rose 79 percent over the previous year, with the retail sector taking up the lion's share.

A new report by CBRE found that M&A activity in the U.S., particularly in the retail sector, had a huge year in 2018, boosting the amount of inbound capital to the country 79 percent over the previous year.

Record M&A activity doubled foreign investment in the U.S., according to CBRE’s U.S. Inbound & Outbound Investment Trends Snapshot report. Inbound capital from Europe was up 18 percent from a “relatively weak” 2017, but down by about the same amount from big years such as 2015 and 2016. 

Retail had the largest amount of inbound capital in 2018, accounting for $30.4 billion, followed by the office sector with $20.3 billion and multifamily at $13.5 billion. Notable deals with foreign buyers included Canada-based Brookfield’s $17.6 billion acquisition of retail REIT GGP in March of last year, as well as Brookfield’s acquisition of Forest City for $11 billion last July.

Where is US capital heading abroad?

On the outbound side, capital flows were up 24 percent year-over-year, led by increased equity fund investment in Europe. The top three sectors—office, industrial and multifamily—represented 76 percent of U.S. outbound capital in 2018, while U.S. investors diversified 11 percent of their total CRE acquisition volume abroad. 

Sixty-two percent of U.S. outbound capital went to Spain, the U.K., Germany, France and the Netherlands. The highest growth market for outbound capital was Poland, which recorded a 654 percent growth year-over-year, with $1.7 billion in 2018 volume.

“Though prime office yields are relatively low in major cities of top outbound capital destinations, U.S. investors may be able to lock in additional returns through currency hedging,” the report read.