China’s retraction from the United States commercial real estate market has left a mark — but there are new substitutes waiting in the wings, coming from all corners of the globe.
“Within the last 24 hours I’ve met with a Chilean group, as well as a German group last night for a closing dinner,” Nuveen Real Estate Global Chief Operating Officer Rahul Idnani said at Bisnow’s New York 2020 Forecast event Wednesday. “It seems to me that the Canadians and the Germans, the Koreans, Singaporeans and select countries in the Middle East are very active in the New York market — as well as the rest of the United States.” Overall, offshore investment into United States real estate has slowed from the levels seen last year. Foreign buyers dropped some $14.7B on American real estate assets in the first half of this year, compared to $19.8B during the same time period the year before, according to CBRE. The major foreign investors that have been active in the U.S. market dropped back, Chinese players invested some $3.8B in the first half of this year, which is down 95% from their annual spending over the previous five years. In their place, players from Bahrain, the UK, the United Arab Emirates and Switzerland all invested significantly more than they have in the past, per CBRE. Meridian Capital Group Senior Executive Managing Director Helen Hwang said she is working with a South American group to acquire U.S. multifamily properties. And while secondary cities are becoming more attractive, panelists said overseas investors are directing their money in those markets to local fund managers because of the unfamiliar terrain. “I think they feel very confident in gateway markets to pursue investments on a direct basis, whereas in Denver, Portland, Raleigh, Scottsdale — they look to managers to take them along for that investment because again, it is still a new market,” Idnani said. While that territory might be unfamiliar for foreign buyers, their interest, combined with competition from domestic and institutional players, is driving up prices. “Right now what we’re finding is that surprisingly, you don’t see a lot of different cap rate deltas in those markets, Atlanta, Raleigh/Durham, Phoenix, Denver,” Hwang said. “The cap rates are not better there. It’s actually pretty saturated.”
Originally posted on Bis Now