Colorado Real Estate Journal - November 19, 2014
Foreign capital is flowing rapidly into U.S. commercial real estate markets, with Canadian and Asian groups accounting for more than half of the investment. Foreign investors that traditionally establish a presence in gateway cities now are beginning to drill down into secondary markets, according to Amy Powell Erixson, principal and managing director of global investments for Avison Young Commercial Real Estate. With 80 percent of its population within 100 miles of the U.S. border, and as this country’s largest trading partner, it’s no wonder Canada is the single largest foreign purchaser of real estate in this country. Asia, on the other hand, is still grappling with myriad issues related to investing in U.S. properties, from tax structures to cultural differences, but, “They’re going to be the butterfly in the room,” Erixson said. China represents is the fastest-growing foreign capital source, accounting for a third of all global cross-border investment, Erixson said. Most of that capital is going into the U.S. – particularly Los Angeles – and London, she said, adding Chinese investment in Vancouver, British Columbia, Canada, is driving up home prices in that market. Erixson led a panel discussion on foreign capital at NAIOP’s Development ’14, the commercial real estate association’s annual North American conference held this year in Denver. Panelists included John MacNeil, president and chief operating officer of Canada-based First Gulf, who discussed foreign investment from his country, including in Denver. The company recently broke ground on 1401 Lawrence, a 22-story Denver office tower. “It’s a good time to own commercial real estate in Denver,” said MacNeil, who noted demand for downtown office space and rental rate growth are among the strongest in this country. Panelists also included Bradley Olsen, president of Atlantic Partners Ltd., who discussed European investment in U.S commercial real estate, and Henry Williamson Jr., founder and managing director of InterCapital Advisors, who talked about Middle East capital flows. Although, “Europe is obviously the main focus for them” because of proximity, Williamson said investors in Saudi Arabia, United Arab Emirates, Qatar and other Gulf Cooperation Council countries are starting to invest more in North America and particularly in the U.S. They are particularly fond of office properties and hotels, he said. According to Olson, German investors are becoming increasingly active in the U.S., while Norway, which has the world’s largest pension fund, with $900 billion in assets, began investing in the U.S. within the last couple of years. The fund is likely to become a bigger player in the U.S. with plans to invest $9 billion a year in real estate globally over the next three years, he said.