We’ve noted in early posts that the commercial real estate market has become a repository for high-quality properties for investors. Unfortunately, these potential buyers are stymied by some banks that are still unwilling to finance acquisitions. So yes, it is a great time to buy, but only if you have the money to do so.
Since there is such a great opportunity to buy high quality buildings at fair prices, the market has seen a number of foreign investors and governments that have signed contracts and closed deals on U.S. commercial real estate.
According to research released this week by Jones Lang LaSalle, foreign investment in U.S. real estate has nearly doubled in the first half of 2010. Office buildings, condominiums and other properties continue to be prime targets for foreign investors who have helped to encourage a 176 percent increase year over year in the United States,
International transactions in the U.S. market jumped from $2.2 billion to $4.3 billion, making the U.S. the second most popular destination in the world for foreign real estate investment, just behind Germany. The research also indicates that the United Kingdom produces the highest amount of cross-border investments in 2010 with $7 billion invested.
Although this is a significant trend that will help to jumpstart the commercial real estate industry, commercial property remains at the bottom of the list of attractive U.S. assets. Foreign ownership of U.S. securities and corporate bonds and stocks are at 49 percent and 18 percent respectively. Commercial real estate has just 5 percent foreign ownership.
One of the reasons that foreign investment remains low is the Foreign Investment in Real Property Tax, which taxes foreign investors heavily when acquiring U.S. commercial real estate. Although the U.S. government earns more money with each investment, the act also prevents many would-be buyers who are turned off by the tax.
Regardless, global commercial real estate investment nearly doubled from $76 billion in the first six months of 2009 to $132 billion for the first half of 2010 – a good sign that confidence is growing in the market.
