|
|
5/03/18
|
A new report from global real estate services firm CBRE reveals that the Los Angeles market jumped ahead of Manhattan to become the largest destination for institutional capital in the nation. A diverse group of foreign buyers accounted for approximately 20% of institutional capital. Surprisingly, China represents a relatively small segment of that. The report, below, was put together by CBRE’s Petra Durnin and George Entis.
The Los Angeles real estate market (Los Angeles County) jumped ahead of Manhattan to become the largest destination for institutional capital in the United States in 2017, according to data from Real Capital Analytics. Institutional capital was largely driven by a pronounced level of growth from equity funds, whose sales volume soared 60% to $6.2 billion in 2017. Equity funds accounted for 66.4% of all acquisitions (up from 27.6% in 2016), while investment managers, sovereign wealth funds, pension funds, insurance companies and banks all had a diminishing presence.
Institutional investors from abroad continued to have a significant presence in LA’s investment market. In 2017, a diverse group of foreign buyers accounted for approximately 20% of institutional capital in Los Angeles (Figure 1). Total volume last year, however, fell by roughly 50% year over year after seven consecutive years of growth. This is not a story of government capital controls restricting outflows from China but one of accelerated growth from private equity funds in a mature cycle. China represents a relatively small segment of foreign institutional capital in Los Angeles so last year’s slowdown can be attributed to late-cycle caution by most types of institutions – except for equity funds.
Private equity funds take on riskier investments than do other types of institutions—they try to maximize “alpha” or excess returns. This late-cycle shift toward value add acquisitions has been a boon for those funds which, by nature of how they raise money, demand relatively higher returns.
|
|
 Return to the Archive page
|
|
|
|
|
Printer-friendly Version
Email an Associate
