Foreign buyers boost commercial real estate investment

Summary:  Canadian, European, and Middle Eastern investors, ushered by the hospitable lending environment, are looking to make real estate investments in the U.S.  The new wave of foreign investors have focused on the East and West Coasts. but are projected to move inland toward Dallas and Houston, which have the attractive job growth and population growth foreign real estate investors find attractive.  The asset class is itself an attractive alternative to volatile securities markets.  Foreign investment is expected to reach $350 billion this year, up 30% from last year, though still below the 2007 record of $570 billion.  It is a sellers market as commercial real estate supply is low.

Dallas --(U.S. Dallas News)--
The commercial real estate market is quickly making up ground lost in the recession.

And so far higher interest rates haven’t rained on the parade of investors looking to take advantage of the market.

A surge in foreign investment in this county’s property markets is also underway.

“The amount of capital that is coming from foreign investors in the U.S. is going to accelerate pretty dramatically,” Mark Gibson, executive managing director of HFF LP, told real estate executives meeting in Dallas on Friday.

Gibson said most of the offshore investors looking to boost their U.S. real estate holdings are coming from Canada, Europe and the Middle East.

Increasingly these buyers are spreading out from the large East and West Coast markets to buy in other cities, including Houston and Dallas.

Commercial property investors are focused on locations with the best long-term growth prospects, Gibson told members of the Commercial Real Estate Women Network at the Omni Dallas Hotel.

“They are looking at markets with job and population growth,” he said. “And they are looking for the infrastructure that is going to support jobs and population growth.”

Dallas-Fort Worth and Houston are near the top of the list of the country’s fastest employment growth markets. All of Texas’ major markets are seeing huge population increases — due in part to migration of people and business from other states.

“There are more corporate headquarters moves happening in the U.S. now than we’ve seen ever,” Gibson said. “A stunning amount of corporate America is relocating out of California to other places.”

Gibson said HFF — one of the country’s largest commercial real estate investment banking and property marketing firms — is forecasting about $350 billion in commercial real estate investment in the U.S. this year.

That’s up about 30 percent from last year, but it’s still well below the record $570 billion in 2007.

Gibson said many of the commercial property problems created by the recession have been solved. “Distressed asset problems — that’s yesterday,” he said.

Most of the big bank lenders “have worked through all their [problem properties] for the most part,” Gibson said. “They are on offense instead of defense — they are deploying capital into real estate.”

Even with this year’s higher interest rates, investors are pumping billions into commercial property, Gibson said.

“They are very tired of volatility in the public securities market,” he said. “They think it’s been hijacked by traders.”

Gibson doesn’t see any of the commercial property pricing and construction excesses that were apparent before the recession.

“There is discipline in the market, which there wasn’t in 2007,” he said. “Commercial real estate supply is still modest.”

In fact, he said, “It’s the lowest percentage supply of commercial real estate as a percentage of GDP in U.S. history.”

http://www.dallasnews.com/business/commercial-real-estate/headlines/20131011-foreign-buyers-boost-commercial-real-estate-investment.ece