By: Andrew Batson, Manager of Research & Analysis, JLL
In 2015, the U.S. industrial sector exceeded the office sector as the largest recipient of offshore capital for the first time. Ever.
In fact, foreign investments across cities, submarkets and sectors, are affecting transaction structures nationwide. According to the Q4 2015 Investment Outlook Report, “With $71.7 billion of cross-border transactions, this investment surpassed the former 2007 peak of $40.7 billion by 71.6%.”
The 2016 outlook should include a focus on primary markets, followed by a steady, selective variation of outsider capital interest into other market segments. But, as JLL suggests, “the offshore buyer pool remains strong and is growing.”
Read on to learn how strong economic and leasing performance benefitted the office, industrial and retail sectors in 2015. As a bonus, check out major investment highlights from the Great Lakes region in each property type.
Property Sector Highlights
Office: The office sector was personified by diversification across primary and secondary markets in 2015, causing 16.5% of growth, according to the report. Domestic primary market demand has been on the uptick, and offshore investor demand has seen a similar improvement.
According to JLL experts, conditions tightened overall as rents for quality and creative office space continued to increase. Research suggests markets should anticipate this trend to continue throughout 2016.
Featuring the largest office deal in the Great Lakes (2015): In August of 2015, a NYC investor purchased six office properties from Duke Reality Corp. in Cincinnati. The investor paid more than $103 million for the portfolio. For more information, read the full story in Cincinnati Business Courier.
Industrial: The industrial sector made it big this year. According to JLL, “Industrial real estate investment volumes set quarterly and annual records, thanks largely to a favorable global yield environment.”
It was the strongest Q4 and full year (2015) in U.S. history, closing in at $64.4 billion total in transactional activity. The sector surpassed office for the first time, receiving 36.1% of inbound foreign capital. Leasing activity should remain strong throughout this year and, according to research, “… more spec development will likely slow U.S. vacancy declines,” in the industrial sector.
Featuring the largest industrial deal in the Great Lakes (2015): In Columbus, a 1.2 million-square-foot complex in Rickenbacker sold for $50.7 million to a Chicago-based REIT. Read the full story in Columbus Business First.
Retail: Investors stayed with safe bets last year, including Class A malls, credit tenants and top gateway markets. Overall, retail investment sales increased year-over-year. Key investors targeted large malls and centers, leading to an improvement in Class A mall performance. Private investors, on the other hand, set their sights on urban deals under $50 million.
Overall, retail investment sales rose slightly from Q4 of 2014. According to JLL, “Despite a $9.2 billion decrease in REIT activity year-over-year, single retail asset acquisitions are growing at a healthy pace.”
Featuring the largest retail deal in the Great Lakes (2015): Inland Real Estate Income Trust Inc. purchased the 475,000-square-foot Settlers Ridge shopping center for $139 million. Read the full story in Pittsburgh Business Times.
Interested in learning more about investments in lodging, multifamily and more? Download the full report below to get an in depth view of investment activity and trends to watch through 2016.
About the Author
Andrew Batson is a Manager for Research & Analysis in the Great Lakes region of JLL. Andrew is responsible for building and continuing to elevate a best-in-class research program that differentiates JLL and drives a competitive advantage in the marketplace through market expertise, analysis and insight. View Andrew’s bio or connect with Andrew on LinkedIn.