Foreign Capital Still Hungry for U.S. CRE…


I’ve been resistant to calling for a bubble in commercial real estate for years… I’ve watched countless others attempt the call. But it’s always ended poorly for them…

I’m sure you remember Janet Yellen’s assumptions that “valuation pressures in commercial real estate are rising as commercial property prices continue to increase rapidly.”

Her amateur hour attempts to call for a bubble mostly fell on deaf ears.

As I noted at the time, we’re far from frothy bubble-line conditions in real estate. With a great deal of capital inflow from foreign investors, we don’t need to concern ourselves.

Despite fears of a Fed rate hike – which I don’t believe will happen this week – U.S. commercial real estate remains a hot destination for foreign capital. China’s economic woes, disaster in the Middle East and falling energy prices have forced foreign capital into safer havens with higher yield, such as CRE.

For all of 2014, $45 billion in foreign capital has pushed in. In the first six months of 2015, we’ve seen $33 billion push in.

And as I’ve long said, I don’t expect that to slow.

These days, that money isn’t just flowing into the typical hot spots of Miami, New York and parts of California. Nowadays, that capital is pushing into Boston, D.C., Chicago, Dallas and Atlanta – secondary hot spots.

I’m not concerned about the Federal Reserve actions… or its talk of bubble like valuations and impending doom of commercial real estate.

The Fed has already proved it’s of no value.