Even though the US is becoming notorious to many foreign investors as a place not worth investing due to the protectionist policy and fears of trade wars, one sector is still seeing many investments pouring in.
We are naturally talking about the commercial real estate (CRE) sector. The investments made into CRE are a considerable portion of the overall investments coming to the country.
Total investments are large enough to make the USA the largest receiver of foreign investments in the entire world
Most of the foreign investment in CRE is going to the major metropolitan regions of America. For example, Manhattan accounts for most of these investments.
But what is the reasoning behind this? Why is so much foreign investment flowing into commercial real estate? And in the end, what’s the trend for the near future going to be?
Why Are Foreign Investors Interested So Much?
It might be puzzling to many, not only due to the protectionist policies but also because these investments far outmatch the ones made into other major world powers.
The explanation for this is not all that simple — many factors drive this interest.
First of all, there is a significant return rate when investing in commercial real estate in the USA. That alone should be reason enough to make this specific market very attractive to foreigners.
However, other factors are involved, especially the volatility of many real estate sectors in several areas of the globe. The most important area here is Europe, where Brexit and overall economic uncertainty are not giving much optimism to real estate investors.
When you compare most of these areas to the primary world power, the US becomes a haven for foreign investors, especially the real estate market that has traditionally been a safe bet for investors, be them foreign or home-based.
Other factors include a stable economy, market scale, liquidity, and flexibility.
Where Is the Money Coming From?
Until recently, or by the last point which data is available, most of the money was coming from several world economic powers like:
- United Kingdom
China’s overall investments are not as significant as the ones from these other major world powers, but their CRE investments indeed are. Its share in the CRE market is around 17% which is more than the money coming from the UK and Canada combined.
Even some of the most significant purchases in recent years are made by Chinese companies — for example, the purchase of 245 Park Avenue and the Waldorf Astoria hotel.
Other significant investors are also coming from South Korea (the largest buyers of US real estate debt) and Australia.
In the end, all of these investments can only be good for the US as they pump more money into the economy. The news is undoubtedly great for many property owners and other real estate investors in the country, especially the ones from California and New York — two largest recipients of foreign investments.
What’s more, the latest predictions are that the same trends are likely to continue in the years to come.