Foreign investment in America, CRE has been booming in recent years, and fierce competition for a limited supply of properties has led some international investors to look beyond the primary markets to find a more suitable deal. Certainly New York still attracts the most foreign capital, including massive sovereign funds as well as high net worth individuals from China and the Middle East.
High profile transactions help to highlight the level of foreign investment going on in the U.S. commercial real estate market. The purchase of New York’s Waldorf Astoria hotel by Chinese insurance group Anbang was big news last year – just one of several major deals struck by foreign investors in NYC.
Along with New York, other American gateway cities also enjoy considerable interest from international investors. Washington and Los Angeles are also notable for the rate of international investments in their commercial properties.
A check of some sources whose business it is to follow the deals involving international capital shows that foreign dollars are being put into some markets that you might not expect.
It might surprise you to know that this South Florida metropolis ranks among the top global real estate investment destinations, according to a report from CBRE. In fact, it comes in at #19, on a list that includes formidable markets like Paris, Hong Kong, and Tokyo. Nearly a billion dollars were invested there in 2015 by foreign sources, many originating in South America.
Falling just short of Miami’s influx of foreign capital, Houston also had a strong showing in 2015. The Texas city, with a population rapidly galloping toward 7 million, is one of the most diverse in the country. Residents speak more than 100 languages. Rising rents and low vacancy rates have made commercial properties here very attractive to foreign investors.
The Urban Land Institute reports that international investors are coming to Houston from China, Canada, the United Kingdom, India, Mexico, Japan, Russia, the Middle East, and from additional countries in Latin America, Asia, and Europe.
The Tel Aviv–based Azrieli Group, has been especially active in Houston’s commercial real estate market. In 2014, the firm paid $76 million to buy its fifth Houston property, a four-story suburban office building. Houston is the location of more properties in the Azrieli Group’s commercial real estate investment portfolio than any other, aside from properties in Israel.
International investment in the Georgia capital was reportedly around that $1 billion mark for 2015 as well. Local observers say that foreign investors see the potential for greater returns in Atlanta compared with similar properties in other cities. Properties in the city’s downtown have been especially attractive to foreign investors.
Availability is favorable in these secondary markets, and competition for commercial properties is not as great as in the top tier cities. This is leading international investors to look beyond places like New York, Washington and L.A. While the largest funds continue to stick with the major markets, smaller funds and individuals in particular continue to expand the reach of international capital in the U.S. commercial market.