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Foreign property investors, long drawn to Manhattan skyscrapers, coastal resorts or urban shopping corridors, are increasingly directing their attention to suburban warehouses.

The changing attitudes are the latest sign of how the Covid-19 pandemic is shaking up the U.S. real-estate market, leading both domestic and overseas investors to rethink their priorities.

The central office districts of New York, San Francisco and Chicago have been hit particularly hard by the pandemic’s economic fallout. Meanwhile, surging e-commerce deliveries are driving up demand for warehouses, particularly those leased to large companies like Amazon.com Inc.

Foreign buyers “see that type of investment as effectively a corporate bond given by one of the largest companies in the world," said Matthew Alshouse, a partner at law firm DLA Piper.

A subsidiary of France’s AXA Investment Managers in December bought a majority stake in 27 U.S. logistics facilities from Cabot Properties for $875 million. That same month, Germany’s Allianz Real Estate said it agreed to buy a 49% stake in a U.S. logistics portfolio in partnership with Crow Holdings.

Korean companies, which are benefiting from lower currency-hedging costs, are particularly active, brokers said. The National Pension Service of Korea, for example, bought 23 warehouses last year in a $2 billion deal in partnership with Stockbridge Capital Group.

Those warehouse deals helped boost the dollar volume of South Korean acquisitions of U.S. commercial real estate, which grew by 88% in 2020, to $5.2 billion, according to preliminary year-end foreign-investor data from Real Capital Analytics.

Overall foreign investment in U.S. real estate fell by 31% to $35.5 billion, along with a broader drop in property sales caused by the pandemic.

China, once the biggest source of overseas investment, didn’t crack the top 10 for the second year running. Insurers and other big investors in China have been under pressure from Beijing to bring money back home, reversing their multiyear buying spree of U.S. properties. Tension between Beijing and Washington also played a role in Chinese investor pullback, analysts said.

Foreign interest in U.S. industrial real estate isn’t new, but it has accelerated during the pandemic and as e-commerce drives more demand for these distribution hubs, said Jim Costello, a senior vice president at Real Capital Analytics.

Aside from warehouses, foreign demand has mirrored American investor interest in U.S. data centers, healthcare and research facilities and student housing, according to a recent report from real-estate services firm Newmark.

While foreign investors traditionally have focused on the major U.S. cities they have visited and know best, brokers say some foreign investors are warming up to the idea of buying real estate in smaller, sunnier cities, which have attracted new waves of immigrants over the past year. Sacramento, for example, saw foreign property investment more than double in 2020, according to RCA.

Corrections & Amplifications

The dollar volume of South Korean acquisitions of U.S. commercial real estate grew by 88% in 2020, according to preliminary data from Real Capital Analytics. An earlier version of this article incorrectly said the dollar volume of those South Korean acquisitions had increased 66% last year. (Corrected on Feb. 16)

(This story has been published from a wire agency feed without modifications to the text.)

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