Commercial News »New York City Edition | By Michael Gerrity | July 15, 2019.

New York City, San Francisco, Boston, Dallas, Columbus and Los Angeles receiving the most foreign capital in 2019.

According to CBRE, the global search for yield and portfolio diversification is leading to the US net-lease real estate market.

Foreign investment in net-lease assets - using office, industrial and retail properties - reached $ 1.9 trillion in Q1 2019, up by 6.6% from Q1 2018's total.

International investors accounted for a larger net leasing investment (15.1%) in Q1 2019 than the same period last year (12.9%). Global investment in net-lease properties has averaged $ 8 billion annually over $ 3 billion annually between 2011 and 2014.

"Foreign investors' appetite for US net leases has increased more than $ 21 trillion to their holdings since 2014. This is more than global capital flows prioritize the risk continues to invest in the asset class, "said Will Pike, vice chairman of Net Lease Properties for Capital Markets.

International buyers increased investment in US net-lease properties by $ 8.8 billion in 2018 - a 30.1% increase from the previous year and the second-highest level on record. New York City, San Francisco, Boston, Dallas / Ft. Worth, Columbus and Los Angeles received the most foreign capital.

The top countries of the world were Canada ($ 5.55 billion), South Korea ($ 3.28 billion) and China ($ 3.22 billion). These three countries accounted for more than half of US net-lease market over this period. Canadian and Chinese investors, South Korean investors overwhelmingly preferred office product.

US net-lease transaction is expected to remain elevated in 2019, with increasing investor demand for net-lease and industrial assets. Rising demand for US net-lease real estate led to $ 68.3 billion in investment volume in 2018 - the highest annual total since CBRE began tracking the market in 2002. Net-lease acquisitions' share of total commercial real estate volume has been in the 11 % -to-12% range since 2012, in the sector.

Overall net-lease capitalization rates are expected to remain stable for the rest of 2019. Spreads over Treasuries have been tightened since 2012 and narrowed to 321 basis points (bps) last year with rising interest rates. Recent decreases to the 10-Year Q1 2019 spread to 386 bps.

"Risk aversion is a key strategy for net-lease real estate acquisitions which are facilitated by the long-term nature of the leases and the credit underpinning the tenants. "While New York City, Washington, DC and Chicago had the largest Phoenix, Seattle, Baltimore, Columbus and Atlanta have seen significant growth," Mr. Pike added.