Europe helps shape current investing patterns
Just as the U.S. residential property investment picture has been transforming itself over the last year, with valuation gains occurring in most areas of the country, so too commercial real estate investing has been on the rebound as well. While not growing at the same pace, it is still seen as extremely attractive, especially to foreign investors. This is mainly due to its relative stability over the past year, as returns on commercial properties such as offices, retail space and warehouses continue to increase steadily.
Poised for a rebound
While not producing stellar returns, the commercial U.S. market is poised to rebound strongly this year. The reduced vacancy rates overall, as well as the perception that the commercial real estate investing arena is less risky and is not considered overpriced at this time, have led foreign investment firms to plow billions into the commercial property sector in this country. It is expected that commercial values will rise throughout the remainder of this year, making it an attractive time for investors before prices rise due to this increased demand.
Increased competition from abroad
Naturally, individual investors, as well as U.S. investment companies, have to contend with increased competition for the most desirable commercial properties because of the increase in overseas investing here. Compared with other countries, commercial real estate investing has increased at a much faster rate in the U.S. over the last six months. While investment increased by six percent in Europe and 15 percent in Asia in the second half of last year, it grew by almost twenty percent here in this country, according to DTZ, a London-based commercial real estate brokerage.
Safety in the U.S. commercial property market
They also report that investment in a single country is a safer way to place investor funds rather than spreading their capital pool over many different nations. Of course, Europe’s current financial woes have played a big part in the overall increase in shifting investment funds to the U.S. Despite all our political stalemate woes over controlling the U.S. budget, foreign investors are still quite concerned over all the volatility in their home countries in Europe, and still see the U.S. as much more stable and stronger economically. With their shift in investment patterns, individual investors should be aware of the way this increased demand will place upward pressure on price valuations for the entire commercial real estate investing segment in the U.S. over the next six months.
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