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Despite heady growth in cross-border investment into commercial real estate over recent decades, there are few studies that examine differences in investment preferences between domestic and cross-border investors at a micro level. We address the gap by examining the characteristics of assets acquired by cross border investors in six major US metro areas, comparing them with the purchases made by US investors in those same areas. Our study uses data on more than 67,500 transactions recorded by Real Capital Analytics (RCA) over the period from Q1 2003 to Q3 2016. As well as examining cross-border investors in aggregate, we isolate and examine purchases by investors from each of the four principal source nations for cross-border real estate investment in these cities. This is important since treating cross-border investors as a single group may obscure important differences between them. We employ multilevel logit techniques and we find across a number of specifications that cross-border investors prefer larger assets, newer assets and CBD locations regardless of nationality. However, temporal and sectoral patterns of investment, as well as evidence for return chasing behavior, vary with the nationality of investor being studied. Keywords Commercial real estate. Cross-border investment. Foreign investment. Investor preferences. Multilevel modelling. Return chasing behavior

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This study explores the strategic entry modes of overseas investors in commercial real estate market, specifically, whether if the market entry and partnering decisions of foreign investors get affected by the participation of peer investors. Existing literature in international business suggests investors tend to follow the choice of their peer group so that to acquire the local information through peer business network. As an alternative, aligning with partner benefits foreign investors on accessing local information via partner(s), also sharing the cost and risk; however, research from corporate finance and international investment addresses that one need to balance this benefit with partner's potential hazard of opportunism. This study conducts multinomial logit model with commercial property transaction data in London, Manchester, Midland and Yorkshire from 2001 to 2015. Empirical results confirm the different choices among foreign and UK investors on submarkets, and show evidence that foreign investors incline to conduct investment independently instead of partnering with a UK investor when a larger group of peers that share similar socioeconomic backgrounds had participated in previous 3 years; this supports the hypothesis that investors adjust their investment strategy ex ante when they anticipate the potential agency issue and moral hazard in partnership in foreign market where information access is limited. The effects, however, varies between London and non-London area in terms of submarket selection, where there is subtle result in non-London area reflecting pure foreign consortia may stay within fringe of cities while UK-foreign consortia incline to explore peripheral markets; on the other hand, UK-foreign consortia have broader market horizon in London sample and have higher probability on exploring the submarkets outside "core" (West End, City and Canary Wharf) area. This study provides insights on asset allocation and market entry strategies of commercial property investors by bridging international business theories with real estate investment. It also leads to a further discussion on the composition of investment group and its influence on the liquidity and market cycle of commercial real estate market.

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