Foreign investment in the USA
By: J. David Chapman/July 5, 2018
We’re in full preparation for the Fourth of July holiday as I write this week’s column. We will be celebrating our Independence Day at The Chapman House, in downtown Edmond, with an Edmond Fourth of July parade watch party. This parade is ranked as one of the top Fourth of July parades in the U.S. I tend to be patriotic all year, but especially this time of year.
The international criticism of our country bothers me and makes me wonder if it has had an impact on foreign investment in U.S. real estate. One of the benefits of being a member of the National Association of Realtors is access to a plethora of research data and reports. The trade group recently issued the association’s 2018 Commercial Real Estate International Business Trends report. If you listen to the mainstream press you might believe the entire world has lost confidence in the United States and has pulled investment in capital assets such as real estate. Not so fast; let’s look at the numbers.
According to the report, foreign investment into U.S. commercial real estate continued to be strong in 2017, with almost one-fifth of NAR commercial Realtors closing a sale with an international client during the year. One of the interesting statistics is that 70 percent of foreign buyers closed their international transactions without loans – paying cash. This strong investment is a result of world economies gaining strength and increasing global output and, according to NAR Chief Economist Lawrence Yun, U.S. commercial real estate is a popular option for surplus funds.
China continues to be the top country of origin for buyers, representing 20 percent of all foreign investors. Mexico was next with 11 percent, Canada with 8 percent, and the United Kingdom with 6 percent. When it comes to international sellers of U.S. real estate, 15 percent of sellers were from China, while Brazil and Israel each had a 10-percent share. International investors purchased and sold the most commercial property in Florida and Texas, with California the third-most-popular buyer and seller destination. The average commercial transaction in 2017 had a median value of $625,000, but international buyer-side transaction had a median value of $975,000 and seller-sided transactions recorded a $1 million median.
Hope you had a great holiday!
J. David Chapman is an associate professor of finance and real estate at the University of Central Oklahoma (jchapman7@uco.edu)