Throughout 2018, the US underwent explosive growth from foreign CRE investors. The global interest in the country’s commercial real estate opportunities can be proved by the exponential increase in FDI capital, which primarily was fueled by mega deals for properties in thriving metropolitan regions.
Since 2010, overseas investors have purchased a whopping $365 billion in US CRE. Last year alone demonstrated a groundbreaking increase.
Experts and analytics are anticipating the international interest for United States’ commercial properties to remain prominent - and most likely steadily increasing. Here are 4 key factors that will continue to attract foreign interest to the national market.
One of the fundamental driving forces in any investment is the profit margin. The United States is a region where it’s easy to anticipate basic profit volumes, due to the essence of longevity and overall stability - especially when compared to other CRE markets around the globe.
When it comes to US CRE, foreign investors can anticipate the outcome of their deals without the daunting uncertainty that naturally comes along with other high profile mega-deals. The US economy is generally viewed as stable - and is often referred to as the ‘world’s safest investment’, due to its strong working culture and unprecedented business expansion rates.
Another incredibly attractive feature that attracts global CRE investments to the US is the comparative rates of payback. The United States is renowned for its inherent ability to produce surplus gains. Investors are more likely to create prosperous income rates in the US compared to the average rates for top competitors such as London and Asia.
On top of that, the US market is characterized by its unparalleled scale and liquidity. The ability to flexibly exit deals is enticing to foreign investors, as it provides the open opportunity to invest the capital elsewhere.
Across the board, many of the US’s top competing countries are currently experiencing economic uncertainty, which funnels the bulk of their foreign investments into the promising realm of US CRE.
According to Joan Feldbaum-Vidra, managing director at Kroll Bond Rating Agency, “That's because the sovereign ratings of the US are supported by its status as issuer of the most important reserve currency in the world… As the world's largest economy -- about $20 trillion in size — the U.S. has relatively favorable demographics that support demand-and-supply based economic growth over the medium to long term.”
The US is home to some of the world’s most popular markets, such as LA, Miami, New York, and Chicago. These hubs of commerce remain on the rise, and there are no signs of a slow down occurring anytime soon.
However, capital is also expanding outside of core markets. Foreign investors looking to make a price-savvy move are increasingly investigating up and coming areas such as Brooklyn and Topeka, Kansas, planning to get a head start in the country’s CRE revolution.
All in all, foreign investment in US CRE is already strong and only expected to expand. To learn more about global and national CRE trends, click here.