From Ezilon.com
Trends of foreign investment in the American commercial real estate market
By Ezilon.com Articles
Jan 24, 2006, 09:47
Trends of foreign investment in the American commercial real estate market
If you are closely watching the American commercial real estate market, you could have noticed that there has been a major growth in foreign investment in the US commercial real estate properties. According to a report from Real Capital Analytics, foreign investors put in US$13 billion into U.S. real estate in 2004, an increase of more than 60% over 2003. An annual growth of 60% suggests the enormous amount of capital invested in the commercial real estate properties of the United States. The main countries that have shown interest in these properties are Australia, Germany, Canada and Middle East. The financing deals range from joint venture partnerships to preferred equity deals.
German investors poured nearly US$5 billion into U.S. commercial real estate in 2004, by far the largest source of foreign capital. The Australians ranked No. 2 with US$3.4 billion investment in 2004. Lately, German investment funds are curtailing their investment in the U.S. because they are facing a lot of strict rules on yields and use of leverage. Even so, Germany leads the pack in foreign investment. In this scenario, German investors are looking for new ways to invest in American commercial real estate, without going against their own legal and financial structures. Many are entering into preferred equity structures, which pose less risk than more traditional forms of ownership. German Investment funds are willing to pour a lot of money into office properties as they are much less management-intensive than retail and residential properties.
The volume of Australian commercial real estate investment is predominately in the office and retail sectors. The major reason for a high level of Australian investment in US real estate is an Australian law that was passed about 10 years ago. This law requires employers to place 9% of their employees’ salaries into Australian superannuation funds, which are akin to American 401(k) funds, except they are not voluntary. As a result, Australia today has the fourth largest volume of pension funds under management in the world.
The U.S. is the first investment option for Australian real estate capital as America is an easier place to invest than other jurisdictions. The transparency of American corporate governance and the cultural affinity Aussies have for America make investment in the U.S. a natural.
Further, while German investors are looking for creative ways to own real estate at the right price and stave off the competition, Australians are less concerned about price, but are flocking to America where they can get higher yields than in Australia.
While Canada ranks third in investment in commercial real estate properties of the United States, Middle East is in a strong fourth position. According to Real Capital Analytics, Middle East invested nearly US$1.2 billion into U.S. real estate in 2004, up from just over $1 billion in 2003. But there is one factor that distinguishes Middle East from other countries when it comes to investment in commercial real estate properties is that much of the capital that originates in the Middle East funnels through investment groups in the UK before the capital is employed in the U.S.
Overall, the main reason for investments in the American commercial real estate is that the United States remains a stable market despite high prices, low cap rates and steep competition.
USA Real Estate Listings:
http://search.ezilon.com/united_states/business/real_estate/index.shtml
Europe Real Estate Listings:
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