Slowdown Fears? Where?


Years ago, no one in his or her right mind wanted to touch commercial real estate. And rightfully so…

Vacancies, falling rents, and capital issues were raising red flags at one point. Declines in credit availability and property markdowns were keeping buyers on the sidelines.

Nowadays, it’s tough to keep buyers away. Billions of dollars are flowing in. In fact, between March 2013 and March 2014 alone, we saw $92.2 billion flow into U.S. commercial real estate.

That was up from $68.2 billion.

China, Taiwan, India, Canada and Mexico all want a piece of US commercial real estate because of the value offered, exchange rates, and interest rates.  In Asia – for example – the unwinding of the real estate bubble is sending investors to the United States.

Six months into 2015, we’re now learning that U.S. commercial property investments soared 45% in the first quarter of the year. Volumes totaled $129 billion year over year with some of the largest transaction in offices and apartments.

That shouldn’t come as a surprise. I’ve been talking about office and apartment space for quite some time now. The opportunities offered are – in my opinion – unbelievable.

Foreign investment in commercial real estate has already more than doubled this year, coming in at $22.2 billion. Most of that is inflow from China and Canada, which isn’t surprising either.

As I noted last year, Canada has quickly become the top foreign investor.  Canada’s developers, investors and banks alike all want a piece of the value – and high yield -- commercial estate offers in America.

“Canadians invested $9.85 billion in U.S. commercial properties in 2014,” according to Real Capital Analytics, as reported by Real Estate Weekly. “No other country invested more, with China a far second at just under $6.6 billion.”

That spending trend isn’t likely to reverse.

In fact, according to the latest annual survey from the Association of Foreign Investors in Real Estate’s (AFIRE), foreign investors have plans to spend even more. “The survey, completed in the fourth quarter, found that 90 percent of respondents planned to maintain the same level of investment in U.S. properties that they had in 2014, or increase it,” according to Real Estate Weekly.

“Moving into 2015, foreign investors continue to view the U.S. as outranking other Western countries for stability, while also offering the best opportunities for capital appreciation. This puts United States, in terms of attractiveness, ahead of European economies on the upswing, such as Spain, and emerging economies, including China and Brazil.”

That tells me one very simple thing. Bet on further growth and upside in commercial estate. Take full advantage, or miss what could be the buy opportunity of a lifetime.