CBRE: Inbound capital flow to U.S. falls nearly 50%

economy
Photo credit: Pixabay/Gerd Altman

Inbound capital flows to the United States totaled $17 billion in the first half of the year, according to a recent report from CBRE. That figure represents a 48-percent decrease compared to the same time period in 2018. Researchers noted that about half of that decline was due to less merger and acquisition activity.

The top five countries contributing to the inbound flow, according to the report, were:

  • Canada (31.3 percent of total with $5.3 billion)
  • Israel (8.4 percent of total with $1.4 billion)
  • Germany (6.4 percent of total with $1.1 billion)
  • United Arab Emirates (6.2 percent of total with nearly $1.1 billion)
  • Bahrain (5.7 percent of total with $1 billion)

Researchers noted that inbound volume from the Asia Pacific region dropped significantly, particularly from China and Singapore, which had been among the top five capital sources in recent years. The region’s share of total capital inflows to the U.S. decreased to 18 percent from the 32 percent seen in the first half of 2018. Meanwhile, regional share for the Middle East increased almost fivefold to 24 percent during the first half of the year from less than 5 percent during the same time last year.

Sovereign wealth funds, insurance companies and pension funds together accounted for 30 percent of inbound volume in primary markets during the first half of the year compared with 3 percent in secondary markets, according to CBRE.

Inbound capital flows in primary markets totaled $7.2 billion during the first half of the year compared to $11.3 billion over the same time period in 2018, the data showed. Secondary markets netted $8 billion during the same time this year, compared to $17.1 billion last year.

Outbound Trends

Meanwhile, U.S. capital outflows were down 18 percent ($18.6 billion in 2019 versus $22.6 billion in 2018), according to the report. Hotels accounted for a 9.5 percent share of the outbound capital flow from the U.S.

The top five countries contributing to the outbound flow were:

  • United Kingdom (26.1 percent of total with $4.8 billion)
  • Germany (11.6 percent of total with $2.2 billion)
  • Italy (8.5 percent of total with $1.6 billion)
  • Canada (6.2 percent of total with $1.2 billion)
  • Sweden (6.2 percent of total with $1.2 billion)

In contrast to significant regional shifts seen in inbound capital, U.S. capital during the first half of 2019 was deployed to foreign regions at nearly the same proportions as in the first half of 2018, according to the report. Despite uncertainty about Brexit, U.S.-originated investment increased in the U.K., which has been the top foreign destination of U.S. capital for the past 10 years. In Sweden and Italy, triple-digit growth rates catapulted both countries into the top five for U.S. capital in the first half of 2019. However, this growth was not enough to completely offset pullbacks to other major European destination countries. Outflows to the region were down 16 percent from the first half of 2018.

When drilling down to individual markets, these five cities saw the most growth for U.S. outbound flows on a trailing 12-month period ending the in the first half of 2019:

  • Helsinki (+2,804 percent to $692 million)
  • Osaka, Japan (+414 percent to $926 million)
  • Barcelona, Spain (+383 percent to $611 million)
  • Berlin (+255 percent to $2 billion)
  • Shanghai (+235 percent to $2.1 billion)

However, researchers noted that Morgan Stanley’s acquisition of the Itis Shopping Centre accounted for 74 percent of total U.S. volume in Helsinki during the trailing 12-month period.