Cross-Border Investments in Houston Industrial Real Estate Nearly $1 Billion

Houston’s industrial real estate is getting a capital injection from foreign investors betting on Sunbelt states, which have seen an e-commerce boom and population gains since the pandemic.

Cross-border investment in U.S. industrial real estate hit a record $19.5 billion in 2021, up 152% on the year, according to a report by JLL Capital Markets. The investments are part of a record $143 billion in investments in the U.S. industrial sector in 2021.

In the Houston area, cross-border industrial acquisitions reached $950 million in 2021, according to JLL. Investments accounted for 21% of the total $4.5 billion in industrial investment in the region, compared to 6% of total industrial investment in 2020.

While Houston has always been a strong market for industrial investment due to population growth and global trade through the Port of Houston, it has benefited from increased demand for industrial assets since the pandemic, with Memphis, Phoenix, Philadelphia and Indianapolis, according to JLL. Investors are expanding their reach from traditional core markets such as Dallas, Chicago, Los Angeles and the Inland Empire.

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“What we’re really seeing is just more and more capital in the system for real estate in general, and industrial product in particular,” said Charlie Strauss, director of JLL Capital Markets in Houston. “As long as we continue to see significant capital-seeking products in the space and tenant demand driving up rents and filling vacancies, I think that will continue.”

Canadian pension plans, which typically invest in, develop and operate facilities similar to U.S. investors, and foreign investors seeking leased assets are driving sales in the U.S. and Houston, Strauss said. Local examples include South Korea-based Mirae’s acquisition of Amazon’s leased USAA facility in Pinto Business Park, and real estate investment management firm PRP’s acquisition of the new Lowe’s distribution facility in New Caney.

Domestically, portfolio deals such as Singapore’s GIC’s $6.8 billion purchase from EQT Exeter contributed to the gains, according to JLL. The transaction included several properties in Houston.

Canadian investors increased their investment activity in the United States by 65% ​​year over year, according to JLL. The transactions included the purchase by Oxford Properties Group of Toronto of a $2.2 billion portfolio totaling 14.5 million square feet. Oxford has also formed a joint venture with Denver-based EverWest to accelerate the growth of its industrial filler portfolio in the United States.

“We are surrounded by a glut of foreign capital in the industrial market which has driven powerful operators to expand their portfolios and platforms,” Managing Director Marc Duval of JLL’s Capital Markets Group said in the report. . “The joint venture between Oxford, a source of foreign capital, and EverWest, a proven operator, will be a long-term strength. We expect more partnerships to form in the coming months due to increased foreign capital interest in US industrial real estate.

Another trend seen in 2021 is a shift in markets with the most cross-border investment. While Dallas, Chicago, Atlanta, Los Angeles and the Inland Empire have always been prime markets since 2016, Memphis, Phoenix, Houston, Philadelphia and Indianapolis have become more sought after.

“Drawn by the strength of their economies and positive demographic trends, investors have accelerated their capital placement into Sun Belt markets,” said Nicholas Rita, director of research, Industrial Capital Markets. “These favorable market conditions will facilitate investor interest in 2022.”

JLL’s Capital Markets Group is a global, full-service provider of capital solutions for real estate investors and occupiers. The firm’s deep knowledge of the local market and global investors provides best-in-class solutions to its clients, whether it is sales and investment advisory, debt advisory, equity advisory or recapitalization . The firm has more than 3,000 capital markets specialists worldwide with offices in nearly 50 countries.