Asian investors are keener than ever to snap up commercial real estate in the US, spending a massive $1.9 billion on office and retail properties in the first six months of this year, reports the Wall Street Journal. That figure, which comes from Real Capital Analytics, is almost four times the $551 million spent on commercial real estate by Asian investors in the whole of 2012.
Of particular interest to Asian investors are properties like small office buildings, branded hotels and retail stores, says the WSJ. Alastair Meadows, head of the international capital group at Jones Lang LaSalle, Singapore, says that there's a huge amount of interest in deals priced in the $30 million to $80 million range.
“That range falls above domestic private investors but below institutional investors. It's the sweet spot," he explains.
It turns out that many of these Asian investors have already been very successful in their home countries, and they're now looking to diversify to try and replicate that success in other countries. And what with commercial real estate being priced so low in the US, it's little wonder they're flocking over here.
According to the WSJ, the big attraction of US properties is the long, stable rents that are characteristic of the US market. These are said to offer better returns than commercial properties in Asian countries like Singapore and Hong Kong, where the average lease term of an office block is just three years. In the US, this average term stretches to around 15-20 years.
Moreover, US rents are said to be more profitable too. Rental yields in the US, which are calculated by dividing the annual rent income by the cost of the property, typically range from 5% to 6% in the US, compared to just 3% to 4% in Asian markets.