What if investors pull back from US real estate?

Tariff-related concerns are causing global investors to consider their exposure to US assets, including commercial real estate (CRE). What does that mean for CRE in the US and around the globe? How might a potential prolonged pullback affect liquidity and prices?

To answer these questions, we examined the historical makeup of cross-border CRE investments for insights and then assessed the potential impacts of any changes. We provide the highlights below.

For a deep dive into our key takeaways from our US and global outlook, read the complete reports:

• Cross-border capital investment in U.S. commercial real estate
• Cross border capital investment across global commercial real estate markets

US: Expect impact to differ by location, property type, and asset size

Cross-border investments in US CRE over the past decade, from 2015 to 2024, were primarily in traditional sectors, especially industrial warehouses and central business district (CBD) offices and in gateway markets, especially New York City in select sectors. They were larger assets in more expensive locations.

Based on this, we believe a sustained and material pullback of cross-border capital investment in US real estate, should it occur, would have:

Little to no impact on:

• Non-traditional sectors like medical offices, manufactured housing, senior housing, and self-storage
• Smaller and most moderate-sized assets, especially in non-gateway markets

Moderate to material impact on:

• Market/sector combinations where cross-border investors historically have been proportionately more active, such as CDB office, full-service hotels, and mid/high rise apartments in the NYC metro
• Larger assets in gateway metro areas: New York City, Los Angeles, San Francisco, Washington DC, and Boston

Modest to moderate impact on:

• Larger assets in other major metro areas, such as Atlanta, Dallas, Denver, Central Florida, Charlotte, Chicago, Houston, Miami/South Florida, Phoenix, and Seattle
• Modest to moderate impact on larger assets in other major metro areas, e.g., Atlanta, Dallas, Denver, Central Florida, Charlotte, Chicago, Houston, Miami/South Florida, Phoenix, and Seattle

Ways to manage risk in US CRE

We see two broad ways to manage risk from the liquidity and pricing impacts of a potential pullback of cross-border capital from the US market.

1. Focus new purchases on smaller and moderate-sized assets, especially in non-gateway markets.
2. Increase allocations to non-traditional sectors that offer the strongest combination of healthy tenant demand, limitations on new supply, and attractive relative pricing.

Global: Impact from US cross-border reallocations

The US is the largest global CRE market, accounting for 38% of global transaction activity in the past 10 years.¹ We examined the historic cross-border capital flows into the US to determine the potential impact on other key global real estate markets should capital flows be reallocated away from the US.

Our analysis of cross-border CRE investments since 2010 showed:

• US is the largest market for in-bound cross-border CRE investment globally
• As a share of total investment activity, however, cross-border CRE US investment is lower than other key global CRE markets.
• Canadian investors are the largest investors into US CRE, investing more than twice as much in US CRE as in the next 10 markets combined.
• Any reallocation away from the US would have a significant impact on the next largest global CRE markets, such as the UK, Germany, France, and Australia.

Get a deep dive into these key takeaways in Cross-border capital investment in U.S. commercial real estate and Cross border capital investment across global commercial real estate markets.