Foreign Investments Enrich South Florida Commercial Real Estate

Nov 28
Foreign Investments Enrich South Florida Commercial Real Estate

The current South Florida commercial real estate market is burgeoning based on the latest reports and on the financial trends occurring over the past few years. The healthy market conditions are due to many converging elements that are stimulating growth and generating opportunity for commercial real estate developers and investors.

One of the key factors contributing to this economic activity comes from increasing foreign investments. Cross-border cash flow hit a peak in 2015. That year foreign cash flow increased 65% year-over-year ($2.6 billion), and was part of a growing movement over the last 10 years.

There are many factors that are driving the continued influx of foreign capital to Miami real estate, including its prominence as a gateway city, the population growth and its growth prospects, Florida being a tax-free state, and the lifestyle.  The fact that investors can vacation here several times a year, and keep an eye on their investment, is an added bonus for many.

Gabriel Navarro, Principal

While such investments moderated comparatively post-2015, this financial activity is still very present and continues its prevalent influence in the market. In fact, according to a CBRE report released in 2016, Asian investment in global commercial real estate was on pace to hit a record and Miami was in the top-5 American metropolitan areas of said investments.

For example, one of the highlight foreign transactions in South Florida commercial real estate from 2017 is by the Sumitomo Corp., a Japanese general trading company, with a value of  $220 million.

Furthermore, over the last decade, the primary sources of these foreign investments in South Florida were: Canada, Germany, and Spain, according to another CBRE Report released a few months prior.

Canadian Commercial Real Estate Investments in South Florida

  • Represents nearly 50% of foreign investments in Broward County alone ($2.1 billion)
  • Reflects 29% of all foreign investments in Palm Beach ($247 million)

Foreign Investments in South Florida (2007- 2017)

Since 2007, most of those investment funds have been placed in retail and hospitality ($2.4 billion); however, office properties also account for a large portion of this activity ($630 million). These funds are not implemented in a unilateral manner, they are spread over many sectors within the South Florida region. Also, these foreign investments are coming from many countries and continents, showing the growing demand for South Florida commercial real estate all over the world.

This trend is most likely due to the fact that 61% of foreign investors found U.S. properties to have more advantageous prices than in their own countries. The sense that these investments are discounted generates an increase of the foreign cash flow into the CRE sector. It presents an opportunity for those looking to diversify their portfolios and plant a flag in Florida, which is currently considered the #1 destination for commercial real estate investments in the United States.

Top US Destination States for Commercial Real Estate Investments

  1. Florida
  2. Texas
  3. California
  4. New York
  5. Arizona

It appears that the cross-border fiscal influence in the region is not just a flash in the pan, nor is it confined to one area of the country. Rather, it’s a long term influence that will continue to bolster the need for new commercial real estate projects in South Florida, across the state, and all over the United States.