The dollar is strengthening, so you would expect institutional real estate investors from outside the U.S. to hesitate before buying here. But that’s not happening, because the relative stability of the U.S. economy and commercial real estate markets offsets the higher buying costs. That’s one of the takeaways from Scaling New Heights, a 2015 commercial real estate outlook from NAR, Deloitte, and Real Estate Research Corporation/Situs, which the groups released February 5.
What’s more, big buyers from outside the U.S. aren’t just looking at properties in New York, L.A., Washington, and Miami; they’re looking at properties throughout the U.S., including secondary markets.
That means buyers from London or Toronto might be interested in your apartment or office property in Omaha or Indianapolis. What investors are looking for, says George Ratiu, NAR’s manager of quantitative and commercial research, is higher yield, and they can often get that more readily in secondary markets than they can in the big markets.
If you have commercial properties in even smaller, “tertiary” markets, your buyers will probably be mainly from the area or region, as they always have been, Ratiu says.
Looking ahead, expect financing to be more widely available this year than in the previous few years. That’s because all the major sources of financing are back: pension funds, commercial banks, institutional investors, even commercial mortgage backed securities (CMBS), which virtually disappeared during the recession. Today they account for about 30 percent of financing.
Despite the improved availability of money, you still have to have a performing asset to get financing at the best terms, as you would expect.
All in all, it’s a good time to be in commercial real estate, because the momentum is on the upswing.
Learn more about the findings in the video with NAR analyst George Ratiu.