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April 23, 2014

Asian Buyers Move in on U.S. Commercial Real Estate

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Asian Buyers Move in on U.S. Commercial Real Estate

Asian investors are eying office and retail properties in North America and have already spent $1.9 billion on U.S. commercial real estate during the first six months of the year, according to data from Real Capital Analytics. That compares to $551.4 million Asian investors spent on U.S. commercial real estate in 2012.

The Wall Street Journal reports that Asian private investors are targeting small office buildings, retail shops, and branded hotels in North America as well as in Europe. "There's great depth and interest in deal sizes between $30 and $80 million,” says Alastair Meadows, head of the international capital group at Jones Lang LaSalle, based in Singapore. “That range falls above domestic private investors but below institutional investors. It's the sweet spot."

Many wealthy Asians investors found real estate success in their home countries are now looking to diversify, seeing if they can duplicate that success abroad. 

“They are attracted to the long, stable rents of more mature Western markets, which often offer better returns than the ultra hot real estate markets of Hong Kong and Singapore, the main destinations for offshore Asian investment,” The Wall Street Journal reports. “An average lease term for an office in Asia is just three years, compared with 15 or 20 years in a market like London or New York. Moreover, rental yields for prime office buildings [calculated by taking the annual rental income divided by the price of the property] are in the 5 percent to 6 percent range in those cities, higher than the 3 percent to 4 percent range in Hong Kong and Singapore.”

Source: “Asian Real-Estate Investors Are Thinking Small,” The Wall Street Journal (July 16, 2013)

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