Foreign investors remain drawn to the U.S., but a flurry of recent domestic and international disruptions have thrown a wrench into their plans, somewhat.
Rather than exit a market known for its relative stability, dynamic economy and robust real estate industry, however, foreign investors are recalibrating, pivoting their investment strategies and structures to focus on immediate, reliable cash flows and long-term resilience.
Since 2010, foreign direct investment has made up approximately 12 percent of U.S. investment activity, according to MSCI Real Capital Analytics. But last year foreign investors seemed to be pausing in light of growing economic and political uncertainties, both here and abroad.
MSCI reported that in 2024, the sum of foreign direct investment in the U.S. fell to $26.5 billion, a 49 percent year-over-year plunge from $36 billion in 2023. “The excitement level for the U.S. has moderated, to say the least, as a result of policymaking that is seen as erratic, unpredictable and not fully settled,” said Brian Klinksiek, LaSalle Investment Management’s global head of research and strategy.
In the U.S., those question marks are tied to rapidly evolving U.S. trade policies and interest rates, which remain elevated when compared to the rest of the developed world.
“People were hoping in their underwriting that there would be a lot more rate cuts than there have been, and there has mostly been a gap there,” noted Cliff Booth, founder & chairman of Westmount Realty Capital, which has an institutional investor base from 12 countries on two continents.
The current administration’s Liberation Day tariffs, subsequent market crash and later suspension exacerbated these concerns, given their potential to drive up inflation and stymie consumer activity. The fallout from Aug. 7, when reciprocal tariffs were imposed on imports from nearly all countries, remains to be seen.
“The market isn’t completely stuck, but transactions are down 70 to 80 percent,” observed Booth. “When you layer on two wars and an administration change, there’s just going to be a lot (more) uncertainty.” But in the minds of most foreign investors, these headwinds appear to be more acute than longstanding.
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