One-fifth of surveyed realtors practicing in commercial real estate closed a sale with an international client in 2016, and as foreign investors flock to smaller-sized commercial properties in secondary and tertiary markets, many realtors are confident that increased sales and leasing activity will occur in 2017.
This is according to the 2017 Commercial Real Estate International Business Trends survey released last month by the National Association of Realtors, which analyzed cross-border commercial real estate transactions made by realtors during 2016. Most realtors who specialize in commercial real estate reside in smaller commercial markets where the typical deal is less than $2.5 million.
Similar to NAR survey findings on foreign purchases of residential real estate in recent years, China was the top country of origin in both buying and selling commercial real estate in 2016, and Florida was the top destination of choice for international clients. NAR’s 2017 Profile of International Activity in U.S. Residential Real Estate is scheduled for release later this summer.
Lawrence Yun, NAR chief economist, says the appetite for U.S. commercial real estate property was strong from foreigners last year and shows little signs of slowing in 2017.
“Multiple years of steady job growth and the strengthening U.S. economy – albeit at a modest pace – makes commercial property a safe bet for global investors looking to diversify their portfolios and generate returns outside their country of origin,” he said. “While Class A asset prices in many large markets have surpassed pre-crisis levels, realtors in many middle-tier and smaller markets stand to benefit from the increased interest from foreign and domestic commercial property investors.”
Added Yun, “Forty percent of realtors expect an increase in foreign buying clients this year. The healthy labor markets and lower property prices in smaller markets are poised to make up a larger share of activity.”
Of the 69 percent of realtors who indicated they completed a commercial real estate transaction last year, 20 percent reported closing a deal for an international client. Realtors completed a median of one buyer-side international deal and two seller-side international transactions. The typical buyer-side sales price was $1,000,000, and the median seller-side price was $550,000.
Additionally, 22 percent of realtors said they completed a lease agreement on behalf of a foreign client. The median gross lease value for international lease transactions was $105,000, with most space typically under 2,500-square-feet.
Nearly two-thirds of commercial foreign buyer and seller clients were non-resident foreigners. The top countries of origin for buyers were China (17 percent), Mexico (14 percent) and the United Kingdom and Venezuela (both at 7 percent), while sellers were typically from China (17 percent) or Brazil, Canada, France and Mexico (all at 10 percent).