Commercial Real Estate News Wrap Up: September 8, 2015
Chinese investors are betting heavily on U.S. commercial real estate.With skepticism over the Chinese economy, these investors are flooding into relatively safe American properties, driven by pressure to enter into yield-driven investments to diversify their portfolios. According to Yahoo Finance, in the last 12 months, Chinese investors invested almost $5.9B in the U.S. market, most of that ($4.5B) in Manhattan. Interestingly, Chinese-Americans actually out spent mainland Chinese by almost 5 to 1 in 2014 when it came to CRE investing. One of the factors cited in a recent article is that many Chinese-Americans are foreign born and not fluent in English so they tend to read the same media as overseas Chinese prompting a mirroring of investment
Capital from China is just the latest in foreign investment in the CRE market here, especially in American’s biggest cities. Globest reports that “A majority of the foreign investors, such as sovereign wealth funds, are looking to acquire trophy properties in the gateway cities, while others are pumping significant capital into new development projects.”
The market is cooling somewhat, but is it a convergence of economics or a bubble about to burst? Rising competition, more careful lending and investments practices compared to the last cycle, and outsourcing are all contributing factors. The big debate is whether or not we are on the verge of a bubble, or if the signs are simply a coincidence under these different market conditions. This has affected big commercial-property brokerage companies.Bloomberg says stock in those businesses “are losing luster as the booming market for deals shows signs of cooling.”
Apartments are continuing to crush home ownership due to job growth, but an odd trend is starting to appear. Homeownership is being dominated by Baby Boomers, counterintuitive to the belief young professionals will start to buy houses with more jobs and an improving economy. This should be an interesting trend to follow moving forward as more youngsters look to rent or stay home with parents.
Overall, CRE investors seem to be pleased with their returns. This is according to a survey analysis report on how major CRE investors are responding to the market published by Commercial property Executive. They’ve found 91% surveyed found their investments to meet or exceed expectations in the previous year, following a general 57% ‘positive reception’ to the real estate market. The gap between small versus big investors has been closing, a key trend in real estate right now on how to incorporate the Average Joe investors into a CRE investment.
8+1 (That’s 9) Things You Should Know in Commercial Real Estate
- Bank regulations may increase competition among private and balance sheet lenders
- Economists Are Split Over Whether the Fed Will Raise Rates in September
- Trepp: Is it too premature to say property prices have bit a bubble level?
- Commercial real estate sales near record pace in Chicago
- Are fears subsiding over CMBS bubble-era loans?
- Subway is planning to pump the brakes on expansion
- Tech Tenants Face Rent Premiums in Major Markets
- Intermodal Hubs and the Industrial Real Estate Boom
- Gap between retail winners and losers widens