Houston industrial real estate is receiving an infusion of capital from foreign investors who are betting on the Sunbelt states, which have seen a boom in ecommerce and population gains since the pandemic.
Cross-border investments in industrial real estate in the U.S. reached a record $19.5 billion in 2021, rising 152 percent over the year, according to a report by JLL Capital Markets. The investments are part of a record $143 billion in U.S. industrial sector investments in 2021.
In the Houston region, cross-border industrial acquisitions reached $950 million in 2021, according to JLL. The investments represented 21 percent of the total $4.5 billion in industrial investments in the region, up from 6 percent of total industrial investments in 2020.
While Houston has traditionally been a strong market for industrial investments due to population growth and global trade through the Port of Houston, it is benefiting from a heightened demand for industrial assets since the pandemic, along with Memphis, Phoenix, Philadelphia and Indianapolis, according to JLL. Investors are expanding their scope from traditional top 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 specifically industrial product,” said Charlie Strauss, a director with JLL Capital Markets in Houston. “As long as we continue to see significant capital chasing product in the space and tenant demand driving up rents and filling up vacancies, I think it continues on.”
Canadian pension plans, which commonly invest in, develop and operate facilities similar to U.S. investors, and overseas investors seeking assets with credit tenancy are driving sales in the U.S. and Houston, Strauss said. Local examples include South Korea-based Mirae’s acquisition of the USAA’s facility leased by Amazon in Pinto Business Park, and real estate investment management firm PRP’s acquisition of the new Lowe’s distribution facility in New Caney.
Nationally, portfolio transactions such as GIC of Singapore’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 U.S. investment activity by 65 percent year over year, according to JLL. The deals included Toronto-based Oxford Properties Group’s purchase of a $2.2 billion portfolio totaling 14.5 million square feet. Oxford also formed a venture with Denver-based EverWest to accelerate growth of its U.S. industrial infill portfolio.
“We are surrounded by a surplus of foreign capital in the industrial market that has propelled strong operators to grow their portfolios and platforms,” Managing Director Marc Duval with JLL’s Capital Markets group said in the report. “The joint venture between Oxford, a foreign capital source, and EverWest, a proven operator, will be a force for the long-term. We anticipate more partnerships to form in the coming months due to foreign capital’s further interest in U.S. industrial real estate.”
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