The Real Deal New York

Foreign dollars continue to pour into US commercial market: report

Florida was the top state where outside investors purchased and sold commercial property last year; California was third
By Dennis Lynch | June 29, 2018 02:20PM

Clockwise from the left: Chinese yuan, British pounds, Mexican pesos, and USA (top) (Credit: Japanexperterna.se via Flickr, Pixabay, and PxHere)

Foreign investment in U.S. commercial real estate remained strong last year, despite a major pullback from Chinese companies that have been hampered by capital controls its government has imposed.

Despite those restrictions, Chinese investors made up the biggest share of foreign buyers in the U.S. at 20 percent, according to a new report from the National Association of Realtors.

While the share of Chinese investors in U.S. commercial real estate was actually slightly higher than in 2016, the total dollar amount plummeted nearly 30 percent, to $120 billion in 2017. The rise in China’s share of the total could indicate that investments from other countries had dipped.

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Florida — at 23 percent — was the top state where foreigners purchased and sold commercial property last year. Texas came in second with 16 percent and California was third with 13 percent.

Overall, outside investment in the U.S. was still accounted for a significant amount of activity, according to NAR’s survey, which found 1 in 5 active commercial agents closed a sale with an international client last year. And more than a third reported increases in international clients over the last five years.

Investors from Mexico made up 11 percent of all CRE buyers, followed by Canada at 8 percent, and the United Kingdom at 6 percent. Combined, Europe, Asia and the Americas accounted for 82 percent of foreign buyers.

NAR said most member brokers specializing in commercial properties are active in secondary and tertiary markets, and suggested the survey data means international investors are interested in those markets.

About 70 percent of sales were closed with cash and about one quarter were closed with mortgages from U.S. sources. Nearly two-third of buyers lived primarily abroad.

Of the international sellers, 57 percent were clients temporarily living in the U.S. on nonimmigrant visas.

While NAR’s numbers reflect strong interest from foreign buyers in the U.S. market, they are slightly lower than figures from 2016.

The 18 percent of agents who reported a foreign CRE sale last year was down from 20 percent. And the 59 percent of realtors who said they completed a commercial sale was down from 69 percent in 2016.