With continued global economic and political uncertainty, foreign capital continues to flow into the U.S. and a large portion of that capital continues to have its sights set on commercial real estate.
It is expected that capital inflow will continue, and even increase, in large part due to the fact that the U.S. property market is the most stable and transparent in the world. Furthermore, the U.S. market produces higher relative yields and price appreciation potential than most, if not all other markets, making it a very easy investment vehicle for foreign money.
Even with the slowing growth in China and much of Europe, which could impact currencies and income over there, non-U.S. capital is still plentiful with a strong demand for U.S. assets. If we look back at 2015, you may recall the record inflow of foreign capital into the U.S. CRE markets. During 2015, foreign purchases of commercial real estate rose more then $87b according to the Association of Foreign Investors in Real Estate (AFIRIE). This is a staggering increase from 2009 when this number was just $4.7b. AFIRIE members are indicating that they expect to increase investments in CRE in the U.S. market in 2017. Additionally, further inflow of capital will likely be driven by the changes to the 1980 Foreign Investment in Real Estate Property Tax Act (FIRPTA), allowing for foreign investors to be treated in the same capacity to their U.S. counterparts.