Foreign Capital Pours Into Commercial Real Estate

Foreign private equity investors are bullish in U.S. commercial real estate as foreign money continues to pour into the sector both in top tier and secondary markets, data showed.

In July, global real estate investment manager LaSalle Investment Management, received a $1 billion equity infusion invest in U.S. real estate by an unnamed large European institutional investor. The billion-dollar mandate will focus on direct real estate investment opportunities across all property types in primary -- and top secondary markets in the U.S.

"We continue to see strong interest from sophisticated investors from around the globe in more customized strategies like this one targeting the U.S. commercial real estate market," said Jason Kern, LaSalle Americas CEO.

Kern said he expects continued economic growth and improving real estate fundamentals over the next few years will support ongoing changes in demographics, technology and urbanization to provide investors with attractive risk-adjusted investment returns across most major property types in the U.S.

Earlier in the month, Beijing-based Wanda Group, sped up its move into global real estate and entertainment. The Chinese conglomerate won the bidding for a plot of land at 9900 Wilshire Blvd. in Beverly Hills, where Wanda Group plans to invest $1.2 billion to build a mixed-use development.

Wanda beat out more than 10 bidders from Asia and North America to acquire the Los Angeles development site, widely, located in a prime luxury residential area walking distance from Rodeo Drive.

In terms of capital investment, a reported 29% of private real estate investors are intending to put more capital to work in the next 12 months than they did in the previous year, according to Preqin, an alternative investment data and research firm.

Overall investor activity in private real estate funds including U.S. investors has increased in the last 12 months, showing that 52% of institutions it surveyed this month had committed to funds in the past year, representing an upward trend from the low of 2011, when just 34% of investors were active in the year.

The strong rebound in economic growth during the second quarter and ongoing job creation are gradually improving the outlook for all of the major commercial real estate sectors, according to the National Association of Realtors quarterly commercial real estate forecast.

Lawrence Yun, NAR chief economist, says after many false starts, the economy finally appears to be turning a corner to firmer ground. “The job market has been the bright spot of the economy this year as employers are feeling more confident about their growth prospects and adding to their payrolls,” he said. “This gradual turnaround from being overly cautious to more optimistic should slightly boost the demand for leasing and purchase activity as well as new construction projects in the upcoming year.”

Yun adds, “The economy can handle the inevitable rise in interest rates as long as commercial rents steadily rise to generate investor returns.”

National office vacancy rates are forecast to remain unchanged over the coming year, mostly due to added inventory entering the market. Rising exports and a shrinking trade deficit should lead to a declining vacancy rate for industrial space (0.4 percent), while retail space is forecast to decline 0.2 percent behind favorable gains in personal income and consumer spending.

“New construction for multifamily housing has picked up in recent months and looks to be alleviating the short supply,” said Yun. “However, the demand for rental housing continues to show strength. As a result, rent growth will outpace broad consumer inflation in upcoming years.”

Increasing institutional appetite for real estate investment is reflected in increasing amounts of capital raised. In the first half of 2014, a total of $43 billion was raised by 80 funds reaching a final close, compared to $33 billion raised by 112 funds in the first half of 2013.

Internationally, many investors continue to favor investing in the U.S., with Asia-based investors seeking the most geographic diversity, Preqin noted in its just released Investor Outlook: Alternative Assets H2 2014.

Indeed the U.S. real estate segment is picking up. One technology that American real estate agents can use to lure these investors in are virtual tours.

Realbiz Media Group, Inc. RBIZdevelops proprietary video marketing software that agents and their brokers can use to promote their virtual tour listings online. The company offers a Virtual Tour Program that allows real estate sellers to create virtual tours and presentationsthat are optimized for mobile viewing and could be syndicated through social media for only $29.95 a month.

The program is equipped with a video search engine optimization (VSEO) tool that automatically generate meta tags and descriptions for virtual tours and listings agents have uploaded to the platform so that they would be found easily by consumers online.

The program also has tools for creating QR codes, e-flyers, and seller reports as bonus features.

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