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Tag Archives: foreign investment in the U.S.


U.S. Real Estate Market Sees First Sign of Possible Slowdown in Foreign Investment

new Jason stats graphic - June 2015The U.S. real estate market saw a record infusion of $70 billion from foreign investors in 2015, but a decline in the pace of foreign capital fundraising may be the first sign of a slowdown in overall foreign investment in the U.S. real estate market, according to a news report from the CoStar Group.

The growth rate at which overseas investors are raising capital grew by only 3% in 2015 in comparison to 2014’s growth rate of 21%, CoStar reported, noting that the Americas and the Europe-Middle East-Africa (EMEA) regions experienced a foreign capital fundraising growth rate of under 2%.

On one hand, plummeting oil prices have shrunk the amount of investment capital in the Middle East, and government officials in China reportedly are more and more wary about the sum of  investor capital leaving their country for foreign borders, industry experts told CoStar.

But on the other hand, the experts expect market dynamics such as quantitative easing and interest rates to overshadow international market insecurities, keeping foreign capital flowing and real estate appealing to investors, the news report said.

Both large and liquid markets in the U.S., China, the UK, Japan and Germany are likely to benefit from strategic deployment of the record  $443 billion in capital raised for investment in commercial properties worldwide, CoStar’s new report said quoting industry experts.  But look for foreign investors to reduce risk by opting to invest through join ventures and platform deals as opposed to direct investment, an expert told CoStar.

Last year’s record foreign investment in the U.S. real estate market, which contributed to the solid increase in property values and rate of transactions for the entire year, was strongest in the fourth quarter 2015, reaching its highest level since 2007, CoStar reported.

But in the first quarter of 2016, transaction activity fell precipitously as investors worldwide assessed market volatility, confirming expectations that 2015’s high level of foreign investment in the U.S. could not be maintained for very long, the report said.

Preliminary data from CoStar found that overall deal volume dropped about $40 billion in first quarter 2015, including a decline of $30 billion from domestic buyers and $10 billion from foreign investors.  Still, the recent trend for overseas capital to favor U.S. assets is likely to continue, but at “uncertain levels,” according to the report.

One CoStar Portfolio Strategy executive noted that while “there are few economies that look as attractive as the U.S., relative pricing still impacts investor desire.”

“If assets seem too richly priced, then rational capital may look elsewhere,” according to the executive.  “Cap rates have been driven lower and gateway cities are priced dearly relative to history. But relative to alternatives in Europe, they’re on the right side of the chart.”

The record $70 billion in foreign investment in the U.S. real estate market represented 11% of the more than $600 billion invested in all commercial real estate in the U.S. in 2015, CoStar said.  However, foreign investment is likely much higher because foreign entities often co-invest with U.S. companies taking the role as the general partner, meaning the transaction is considered a domestic investment.

The biggest source of foreign investment in the U.S. real estate market comes from the United States’ neighbor to the north.  Canadian investors — primarily pension funds and other institutional capital — have long favored U.S. office buildings and lately, apartment properties.  Since 2014, Canada has represented 28% of direct foreign investment into the U.S., followed by Western Europe at 23%; China and Hong Kong at 14%; Southeast Asia, including Singapore, at 13%; the Middle East nations at 11%; South Korea at 4%; and Japan at 2%.

For more information about Philly office space, Philly retail space or other Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf (jason.wolf@wolfcre.com) Leor Hemo (leor.hemo@wolfcre.com) or Lee Fein (lee.fein@wolfcre.com) at Wolf Commercial Real Estate, a leading Philadelphia commercial real estate broker that specializes in Philly office space and Philly retail space.

Wolf Commercial Real Estate is a Philadelphia commercial real estate brokerage firm that provides a full range of Philadelphia commercial real estate listings and services, marketing commercial offices, medical properties, industrial properties, land properties, retail buildings and other Philadelphia commercial properties for buyers, tenants, investors and sellers.

Wolf Commercial Real Estate, a Philadelphia commercial real estate broker with expertise in Philadelphia commercial real estate listings, provides unparalleled expertise in matching companies and individuals seeking new Philly office space or Philly retail space with the Philadelphia commercial properties that best meets their needs.  As experts in Philadelphia commercial real estate listings and services, the team at our Philadelphia commercial real estate brokerage firm provides ongoing detailed information about Philadelphia commercial properties to our clients and prospects to help them achieve their real estate goals.  If you are looking for Philly office space or Philly retail space for sale or lease, Wolf Commercial Real Estate is the Philadelphia commercial real estate broker you need — a strategic partner who is fully invested in your long-term growth and success.

Please visit our websites for a full listing of South Jersey and Philadelphia commercial properties for lease or sale through our Philadelphia commercial real estate brokerage firm.

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Foreign Investors Bullish on U.S. Real Estate Investment

new Jason stats graphic - June 2015Foreign investors remain bullish on U.S. real estate investment, according to a new survey that was conducted before Congress passed federal tax reforms that likely will  provide even greater inventive for foreign investment.

The annual survey of the Association of Foreign Investors in Real Estate (AFIRE) found that 64 percent of respondents intend to invest more in U.S. real estate in 2016 while 31 percent plan to keep foreign investment in the U.S. at the same level as last year, according to a CoStar News report.  None of the respondents said they planned to decrease U.S. real estate investments.

Globally, New York took the top spot for foreign real estate investment for the second year in a row, outranking London, while Los Angeles leaped into third place, up from 10th last year, in the survey of the 200-member AFIRE, which represents institutional real estate and other organizations with a combined estimate of more than $2 trillion in real estate assets under management, CoStar reported.

Seattle joined the top five U.S. cities for the first time, tying with Boston for fifth place, according to the news report.  Reflecting the downward spiral in oil prices that played a key role in Houston’s real estate and general economic slowdown, Houston dropped from the third position to the 11th position in the latest survey.  CoStar also reported that San Francisco dropped from second to third, although rental rates and property prices have continued to appreciate rapidly.

Washington, D.C., which tumbled from 10th to 15th place last year, placed well both globally and among U.S. markets, ranking 8th worldwide and fourth in the U.S., up from fifth in 2015.

The AFIRE survey was conducted late in the fourth quarter 2015 before Congress enacted wider tax exemptions for foreign investment in the U.S. under the Foreign Investment in Real Property Tax Act, or FIRPTA, a 1980 bill that imposes income tax on foreigners disposing of U.S. real estate interests, CoStar said.  The tax reforms, which were adopted on December 18 as part of the federal appropriations bill, exempt qualified foreign pension funds and their entities from taxation under FIRPTA.

A key executive at AFIRE told CoStar the FIRPTA changes had been under considered in Congress for some time and foreign investors did not necessarily expect them to pass in 2015.  The changes will provide foreign investors a welcome relief from certain taxes and, in time, further incentive for U.S. real estate investment, James A. Fetgatter, chief executive officer of AFIRE, told CoStar.

Fetgatter noted that the most recent survey demonstrated strongest level of confidence in years about foreign investment in the U.S., even without the FIRPTA changes.

“We have a clearly recovering real estate market and the dollar is increasing. There are not a lot of roadblocks to worry about, like for example the immigration crisis in Europe, stock market fluctuations and a possible recession in China, and bubbles in the Brazil real estate market,” Fetgatter told CoStar.

For more information about Philly office space, Philly retail space or other Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf (jason.wolf@wolfcre.com) Leor Hemo (leor.hemo@wolfcre.com) or Lee Fein (lee.fein@wolfcre.com) at Wolf Commercial Real Estate, a leading Philadelphia commercial real estate broker that specializes in Philly office space and Philly retail space.

Wolf Commercial Real Estate is a Philadelphia commercial real estate brokerage firm that provides a full range of Philadelphia commercial real estate listings and services, marketing commercial offices, medical properties, industrial properties, land properties, retail buildings and other Philadelphia commercial properties for buyers, tenants, investors and sellers.

Wolf Commercial Real Estate, a Philadelphia commercial real estate broker with expertise in Philadelphia commercial real estate listings, provides unparalleled expertise in matching companies and individuals seeking new Philly office space or Philly retail space with the Philadelphia commercial properties that best meets their needs.  As experts in Philadelphia commercial real estate listings and services, the team at our Philadelphia commercial real estate brokerage firm provides ongoing detailed information about Philadelphia commercial properties to our clients and prospects to help them achieve their real estate goals.  If you are looking for Philly office space or Philly retail space for sale or lease, Wolf Commercial Real Estate is the Philadelphia commercial real estate broker you need — a strategic partner who is fully invested in your long-term growth and success.

Please visit our websites for a full listing of South Jersey and Philadelphia commercial properties for lease or sale through our Philadelphia commercial real estate brokerage firm.

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