With the rising globalization and inter-country trading incentives, a surge in foreign investment in the U.S. Commercial Real Estate (CREs) business has been observed.
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High prices and low yields at home are pressing several Asian economies to redirect all investments from their local CREs to U.S-based CREs. The prestige resulting from U.S. core market acquisitions is aiding further investment into the region.
For the year 2015, real estate firm CBRE has dubbed the U.S. as the hot spot for Asian real estate investment, Nuwire Investor reported. This is represented by the fact that foreign direct investment (from Asian countries) in U.S. CREs swelled up to $3.3 billion in the first quarter of 2015, against the total investments of $7 billion in 2014.
Another global real estate assessment, conducted by Cushman & Wakefield’s, revealed U.S. as the top investment market for CREs for the year 2014. This news is not only good for commercial property sponsors; it is also a lucrative opportunity for U.S. investors looking to diversify their risk portfolio.
With more Asian and other investors channeling their funds towards the U.S, the barriers to entry mean that they will need reliable and quality partners in U.S. to invest with. They need partners who can generate the best investment deals, provide underwritings, manage all investments, assemble the decks and provide continual administrative services with regards to the CRE projects.
Similarly, local CRE investors searching for equity can partner up with Asian investors to help them navigate through the U.S. regulations, in exchange for the capital worth investing. This “symbiotic” relationship with foreign investors will pave way for more CRE demand, leading to more capital construction and acquisition projects.
Individual investors can also invest directly in the REITs that specialize in CREs or buy stocks in firms that specialize in real estate brokerage. For instance, Boston Properties has controlling interest over General Motors Building, NY. In a 2013 brokerage deal with CBRE, the REIT introduced Chinese investment partners into the mainstream CRE business in the U.S.
The flow of investment into U.S. CRE market does not mean that any local investor can partner up with Asian investors for equity, in exchange of services. Certain linguistic and cultural barriers exist. In addition, investor demands and target markets are also different and vary from one investment to another. Where Chinese businesses are more interested in acquiring reasonably priced properties in Los Angeles and New York, Japanese have an appetite for the Bay Area CREs.
Paul Cook is a Realty Biz News Contributor.