Commercial real estate investment has become a truly global enterprise, with huge sums being shifted by pension funds and investment groups to take advantage of opportunity wherever that may occur. American investors are turning their eyes abroad, as challenging economic conditions open up possibilities in other world markets.
Improvements in communication, loosening regulatory restrictions, and currency fluctuations are some factors contributing to increased international investment in CRE. North America is still the most popular destination for global investment, well ahead of Western Europe.
Like their counterparts elsewhere, American investors are alert to opportunities outside the U.S. Favorable interest rates and land prices make several international markets attractive to investors from the U.S. They’ve been significantly active in Asian markets –particularly in Japan.
Japan’s recovery from the downturn has been slow, and the yen continues to be weak. A favorable rate of exchange has encouraged U.S. investors to take a closer look at Japanese commercial properties. The upcoming 2020 Olympics in Tokyo are another factor drawing the world’s attention to Japan and the potential opportunities there. Investment in hotels and logistics properties has been high in response to these plans.
Interestingly, investment opportunities in the Tokyo metro area are harder to come by. This has led to greater activity in markets like Osaka, Nagoya, and Fukuoka. Vacancy rates in the office sector have slowly improved, and while rent growth has also been slow, it has at least been steady and this trend continues. While the number of office workers in Tokyo is actually declining, there is growth in smaller cities like Chiyoda and Minato.
India’s commercial market is packed with potential, and growth is brisk in its cities. Bhubaneswar and Cuttack, for example, are among the region’s fastest growing IT and education hubs. This has boosted development in these locations, leading to more investment opportunities.
The Blackstone Group is the largest owner of commercial real estate in India. Goldman Sachs and Warburg Pincus also have a substantial stake there. This past year Blackstone acquired the 247 Park Office project in Mumbai for ($160 million). In early August, it partnered with the Panchshil Group to develop an information technology special economic zone in Pune.
Investment in Mexico’s commercial market has undergone some significant adjustments in recent years. The creation of investment trusts, competitive land prices, significant changes in regulations, and economic development in urban locales have contributed. The Association of Foreign Investors in Real Estate (Afire) lists Mexico as an important emerging market for commercial investment.
Development in recent years has been brisk in places like Mexico City Monterrey, Guadalajara and Queretaro. The capital, in particular, has become an important center for IT and the financial sector. Mexico’s commercial market has recovered and there is a wealth of attractive deals that have the attention of U.S. investors.
Familiarity with these alternative markets can help U.S. commercial investors stay ready to capitalize on developments there. As these three economies continue to recover from the downturn and governments make regulatory adjustments, new options will arise.