Recent commercial real estate trends in New York indicate that the world may be taking a bite out of the Big Apple. Investors from every corner of the globe have been purchasing New York commercial real estate this year at an ever increasing pace.
According to a report from the National Association of Realtors, international purchases of commercial real estate in New York have been increasing every quarter for the past 12 quarters. This is in line with an overall foreign investment trend in the U.S., which has been surging as well based on data from the U.S. Commerce Department. According to the Commerce Department, direct foreign investment in the U.S. was $28.7 billion between January and March of 2012. Foreign investment has been led by Europeans seeking a safe haven from the multiple debt and currency issues in the Euro Zone.
Looking at the real estate sector shows $82.5 billion in foreign investment for the 12 month period ending in March 2012. This is an increase of 24 percent on a year over year basis. It was also noted that just 9 percent of residential real estate sales come from foreign buyers, indicating that the bulk of the investment in commercial real estate.
The global real estate advisory firm CB Richard Ellis confirms the inflows of foreign capital to the real estate sector in the U.S. Their Capital Value Index shows a 1.5 percent increase for the Americas, while the remainder of the world had flat growth. U.S. growth was concentrated in major metros areas including New York City, Washington D.C., Boston, and San Francisco. The report cites a desire on the part of foreign investors to purchase assets denominated in U.S. dollars in an effort to shelter them from European currency risk. Commercial real estate investment in New York is driven more by wealth protection strategies at this time versus income producing needs.
The surge in commercial real estate in major metro areas has seen the introduction of several private funds and REITs looking to capitalize on the trend, which is expected to remain in place as long as Europe continues to struggle economically and yields on U.S. Treasuries remain at their historical lows.