International by Design
A huge uptick in profits among Chinese corporations is translating into more commercial real estate investment in the United States. For example, last year the Chinese insurance group Anbang purchased the Waldorf Astoria for $1.95 billion, the Chinese developer Greenland Group invested in new multifamily housing at Metropolis in Los Angeles and at Pacific Place in Brooklyn, N.Y, and the Chinese Wanda Group announced its first major project in Chicago and a mixed-use development in Beverly Hills, Calif.
In addition to China, firms from Canada, Norway, Japan, and Germany are seeking hefty, safe returns on their U.S. commercial real estate investments.
“Foreign investment in the U.S. is not a new phenomenon; we are just seeing an expansion,” says Mark Levine, CCIM, JD, LLM (tax), author of International Real Estate and a professor at University of Denver. “The number of countries and the amount of investment are growing.”
Appreciating Capital
The United States is ranked No. 1 in opportunities for capital appreciation, according to the Association of Foreign Investors in Real Estate. As a result, the CCIM Institute is taking measures to facilitate cross-border transactions that make it easier for its members to adopt a common shared language of real estate transactions. That assists the already highly skilled CCIMs in cultivating relationships internationally.
“Capitalists take advantage of new opportunities,” says Carmela Ma, CCIM, CIPS, RICS, president of CJM Associates, in Beverly Hills, Calif., and CCIM instructor. “It's in our best interest to encourage foreign investment in the U.S. because it helps keep interest rates low. Our commercial real estate is attractive because the United States provides the most stable real estate opportunities available. Historically, only 2 percent of U.S. real estate is owned by foreign nationals. AFIRE expects a 60 percent increase over the next five years.”
Ma sees three major hurdles for international investors in the U.S. CRE market during the next five years: availability of property; asset pricing; and competition from other investors.
With intense competition for primary market properties, she believes multiple global investors are moving to secondary and tertiary markets, which is more good news for many CCIMs.
Driving Growth
The stability in the U.S. government and fee simple ownership attract global investors. As the U.S. economy steadily grows, the U.S. dollar has surged ahead of other major currencies except the Chinese yuan, according to CNN Money. During the past year, the dollar has increased in value by almost 10 percent compared to the British pound, 22 percent to the Japanese yen, and 21.8 percent to the euro.
“I expect the U.S. economy to double during the next five years,” says Adrian Arriaga, CCIM, president of AAA Real Estate and Investments in McAllen, Texas, and National Association of Realtors liaison to China. “This is a great opportunity for CCIMs to cultivate relationships and work with foreign investors.”
For those who are not sure how to begin, Arriaga recommends visiting local chambers of commerce to determine which foreign nationals are entering their local markets. Cultivating contacts at local universities can help determine which countries international students are coming from, he adds.
“Once you know which countries are investing in your community, you can figure how to work with them,” Arriaga says. In McAllen, he has cultivated relationships with South Koreans who speak Spanish as their second language and are acquiring properties in the downtown area.
With global investors moving into many secondary and smaller markets, CCIMs have an ideal opportunity to promote their skills and expand their businesses.
Sara S. Patterson is senior editor of Commercial Investment Real Estate.
Global Education Strategy
The CCIM Institute's strategic plan for education has moved from reactive to proactive and propelled it into emerging and traditional markets. For example, commercial real estate is booming in Ghana, a nation of 27 million people with a strong cultural heritage, plentiful resources, and a stable government in West Africa.
“We live in a global village and commercial real estate, especially, is more global now than local,” says Vicky Sampah, managing broker at L'Abri Realty in Aurora, Ill., and CEO of Abri Properties in Ghana. She sponsored a CCIM pilot online course in Accra, Ghana, during June. “The CCIM Institute is the right organization with the right training in commercial real estate for professionals in Ghana who need practical training.”
For more traditional markets, CCIM participated in MIPIM, the international property market forum, in Cannes, France, in March. CCIM leaders met with more than 20 international commercial real estate leaders. “Face-to-face meetings with our international-based colleagues allowed us to broaden the reach of the CCIM designation,” says 2015 CCIM Institute President Mark Macek, CCIM.
The next five years promise tantalizing possibilities. The trick for the CCIM Institute is to marshal its resources in the right countries with the right commercial real estate professionals.
With that goal in mind, the CCIM Institute is sponsoring an international networking lunch on Oct. 29 in Austin, Texas, during its annual business meeting. The two-hour lunch will feature a panel of experts from Taiwan, South Korea, China, Japan, Canada, and Mexico discussing “The Mechanics of Inbound International Investment.”
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