Money

International Investment: A Look at the US Property Investment Market

Money

We have heard a lot recently about the relative fall in the UK property market, but how is property fairing elsewhere? Looking into the US property market, there are mixed results.

Amongst some high-profile bankruptcies paired with global economic tension, the US saw economic growth combined with a record-breaking holiday season. This was bolstered by a growth in disposable personal income and heightened consumer confidence, which would imply strong growth across the property sector.  

Retail investment

Investment in retail however is down 6.2%, from $32.2b in 2017 to $30.2b by the close of 2018. The main reason for this fall in investment is largely due to the lack of big-ticket investment deals.

Deloitte report that there will be many new challenges facing retailers in 2019. The industry is set for a major transition, with retailers needing to make bold decisions to succeed in the market.

Residential sales

Residential investment sales paint a very different picture however. Accounting for 51.9% of total transactions in the market, residential investment sales were up 8.9% in 2018 to $15.7b.

A recent poll by Reuters suggests that this growth may not be sustained. Price growth is predicted to drop from previous forecasts, from an anticipated 4.7% growth to 3.7% for 2019.

To reinforce this, sales did slow in the second half of 2018. This is partly due to cooling measures that were introduced, as private rental sales fell by 10.6% at the close of 2018. Economic uncertainty in the US is likely to continue to affect the property sector, with many developers reassessing future development plans.

Industrial sector

Overall, industrial investment sales fell 16.9% in 2018, which occupied 11.3% of total investment sales. Although this figure seems substantial, the industrial performance was mixed, and varied hugely based on the type of factory and location of the industry.

Over the next four years, over 2 million square metres is estimated to become available. However, over 65% of this is owner-occupied, comprising single user industrial developments.

Alternative assets

Much like the UK, we are seeing a different picture when it comes to alternative property assets. Student property investments have seen continued growth, with an increase in applicants applying to US universities. This also translates over to hotel room investments and buy-to-let investment opportunities, though supply is struggling to meet demand in the sector.

Rental yields

Rental yields stayed at about the same level by the close of 2018. Forecasts predict that rental growth will remain stable going into 2019, as retailers adapt to the on-going presence of e-commerce and consumers’ changing preferences.

The takeaway

Overall, property investment was a mixed bag in 2018 in the US. The takeaway is that investors may begin to shift focus into property that is seeing growth, similar to in the UK. The office sector in particular is seeing sizable growth and will be attractive to property investors.

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