U.S. commercial real estate (CRE) can expect to experience a steady flow of foreign capital this year as overseas investors seek to add prime domestic real estate to their ownership portfolios, according to research conducted by Jones Lang LaSalle (JLL), a global real estate services firm.
‘While most foreign investors sought comfort in the best performing U.S. markets, such as New York and D.C., interest has begun to extend to the five major U.S. markets,’ says Steve Collins, managing director for JLL's International Capital Group. ‘Within 12 months, they will be interested in eight to 10 others throughout the country. We talk to international investors every day, and while most of them have also begun to target Boston, Los Angeles, San Francisco and Chicago, we think that by the end of the year, Seattle, San Diego, Atlanta and Houston will be added to the mix for strategic purchases.’
According to the company, global fund investors poured $11 billion into U.S. CRE in 2010. The largest volume of international capital in U.S. CRE last year came from Israel, with $670 million, followed by Germany ($520 million), Canada ($460 million) and South Korea ($460 million.)
‘Last year, foreign purchasers took advantage of a pickup in activity in the core markets to trade effectively,’ Collins adds. ‘The life companies and open-ended funds are looking for transparent and safe places to park their money, and commercial real estate is looking stronger every day.’
However, U.S. CRE may find itself in competition for investors' attention with commercial properties across the Atlantic. JLL's European Industrial Markets Spring 2011 reported that the continent's industrial real estate investment volumes in 2010 reached more than $11 billion – a 28% increase from the previous year. The U.K. remained the largest European industrial investment market last year, recording 35% of the total volume, followed by Germany, at 14%.
Chris Staveley, director of JLL's EMEA Capital Markets team, observes that European CRE activity in 2010 could have been much stronger.
‘Investor activity in 2010 was, to a certain degree, subdued by the lack of available prime industrial assets,’ he says, ‘which means that while improved market fundamentals supported strong investor appetite and led to ongoing yield compression across Europe, overall growth in industrial investment volumes was lower than the 45 percent increase recorded across all direct European commercial real estate investment.’
SOURCE: Jones Lang LaSalle
