Overseas Investors Accelerating CRE Property Price Gains (CoStar News)
Global real estate investors continue to increase their flow of funds into commercial U.S. properties and the trend appears to be causing property values to increase at a much faster pace than if the same or similar properties were bought by local investors.
“Their thesis quantifies what many CRE professionals have suspected for years: that foreign buyers are liable to pay more than their domestic peers for U.S. real estate assets,” said Eric Hawthorn, director of research and communications at Llenrock Group, a Philadelphia-based capital markets firm providing real estate debt, equity, joint venture partnerships and advisory services.
“Since several gateway U.S. markets are among the top destinations in the world for international CRE capital, foreign investors pursue opportunities here extremely aggressively,” Hawthorn said. “Whether deployed for stability or returns, foreign capital is flooding into U.S. gateways in such quantities that it is skewing the valuations of upper-tier properties across asset types.”
According to Hawthorn, foreign investors appear to be competing with each other, rather than with their domestic counterparts, which may create a disconnect between properties’ operating income and the sums that foreign investors will spend in order to outbid their peers.