With foreign investors approaching record purchases of commercial property in U.S. cities, conditions may not be as frothy as they
appear
At home, Canadian real estate investor Armin Martens faces a soft economy and a declining currency. But when he looks south of the border, the president and CEO of Winnipeg, Manitoba–based Artis Real Estate Investment Trust sees a commercial property market teeming with opportunity.
“The U.S. is not just the largest economy in the world; it’s not just the largest real estate market in the world; it’s also the best-performing,” says Martens, whose firm owns C$5.4 billion ($4.07 billion) worth of properties there and in Canada. “Today’s outlook in the U.S. is very good.”
Publicly traded U.S. real estate investment trusts generated profits of $13.4 billion in the third quarter of 2015, up 13.1 percent from $11.8 billion during the same period in 2014, according to the Washington-based National Association of Real Estate Investment Trusts.
Artis is one of many international investors buying into the country’s hot real estate market, a trend that has prompted whispers of frothy conditions.
Foreign investors spent $84.6 billion on U.S. real estate in the first ten months of 2015, according to Real Capital Analytics. That investment is on pace to eclipse the previous record, set in 2007, says Jim Costello, senior vice president at the New York–based research firm.
Through September, 14 percent of U.S. commercial real estate investment came from abroad, versus 10 percent for the same period in 2014, reports CBRE Group, a commercial real estate brokerage based in Los Angeles.
“The world loves the U.S., and they’re continuing to put money into this market,” says Jeanette Rice, Dallas-based head of investment research for the Americas at CBRE. “The U.S. is fairly stable. We have our economic ups and downs, but overall the economic cycles are somewhat predictable.”
In one recent splashy deal, Middle Eastern sovereign wealth fund the Qatar Investment Authority bought 44 percent of New York’s $8.6 billion Manhattan West development from Brookfield Property Partners, a division of Toronto-based Brookfield Asset Management.
This past summer Spanish billionaire Amancio Ortega, head of fashion brand Zara, ponied up $370 million through his real estate investment arm for a block of Miami Beach’s Lincoln Road, the second-largest deal in Miami-Dade County history. In March, Ortega’s company paid $176 million for the former Esquire Theater in Chicago.