‘Brexit’ and its Potential Impact on U.S. CRE
Just over a month ago, on June 23, 2016, the United Kingdom, which consists of England, Wales, Scotland, and Northern Ireland, voted to leave the European Nation.
Although this process will take roughly two years, there are many immediate as well as distant significant repercussions that will endure. One of those potential impacts may very well impact the U.K.’s commercial real estate market (CRE), as well as its investors, both in the U.K. and abroad.
With uncertainty to be the prevailing mood for the U.K.’s commercial real estate markets and for those who’ve invested there, forecasters in the U.S. expect to see increased interest in U.S. real estate investments from overseas as this uncertainty continues to grow over changing British and European economies. The U.S. commercial real estate market could see an influx of capital investments from the U.K. and from other countries whose investors may pull capital investments out of U.K. properties, thus the U.S. commercial real estate market could greatly benefit from foreign investors seeking a safe-haven.
But even prior to Brexit, U.S. commercial real estate has continued to be an attractive investment option for foreign investors. With demand pushing commercial real estate valuations up, the U.S. is considered the number one destination for foreign capital. It is currently being fueled by low interest rates and relative attractiveness compared to other investment alternatives. According to statistics, foreign investors currently account for up to 24% of U.S. real estate investment sales. Here we will share some reasons why investing in U.S. commercial real estate is a wise decision.
With financing continuing to be readily available, commercial lending has increased by 16% in the last 3 years. Commercial lenders are competing for deals, and banks are relaxing lending standards to allow developers to put up less money to secure financing.
The U.S. CRE industry is worth trillions of dollars and includes about a quarter of the world’s high quality commercial properties. The New York market alone has more office space than Canada’s entire market.
There’s a high level of control available to investors in the U.S. CRE market. Investing in stocks is a more passive activity, while investors can hand-pick properties from the inventory of U.S. commercial properties.
The U.S. economy is the most stable and open economy in the world. It attracts buyers from countries where the situation is much riskier since foreign investors can operate with relative freedom in the U.S.
Only time will tell exactly how the U.S. commercial real estate markets will be impacted by Brexit, however, investing in the U.S. market is a wise decision if investors are looking for general steadiness and stability for thei