The height of foreign purchases of U.S. real estate was in 2017. Charly Triballeau/AFP via Getty Images
There are still a lot of unknowns about the commercial real estate market, especially concerning office space. But one thing we do know is that foreign investment in commercial real estate here in the United States has scaled back significantly, with some exceptions. And that decline, and those exceptions, shed some light on just how domestic commercial real estate is doing.
The height of foreign purchases of U.S. real estate was in 2017.
“That was representing on the residential side $153 billion,” said economist Jessica Lautz, vice president of research with the National Association of Realtors.
It’s now just $53 billion. “It really has come down,” Lautz said.
But the percentage of homes in the U.S. owned by non-Americans is usually pretty small — between 2% and 3%. The percentage of commercial real estate owned by foreign investors is a lot higher — or at least it has been.
“Historically, the average is around 10 or 11%, and last year it was 6%,” saidRiaz Cassum, global head of international capital for real estate services company JLL.
That drop? Stephen Bethel saw it first hand. He’s national director of Frazier Capital Brokerage & Valuation.
“My Tiawanese banking clients, they’re not making any commercial real estate loans in the United States right now. And the home offices are afraid of U.S. commercial real estate, and we’ve heard that also from some of our Canadian clients as well,” Bethel said.
On the one hand, interest rates are still high and there’s uncertainty about when they’ll come down. That’s affecting investors both foreign and domestic. Sales volume in commercial real estate is down 63% in the U.S., Bethel said.
But on top of that, some foreign investors have economic problems back home and need to cash out — that’s particularly the case for Chinese investors. Korean investors bet heavily on office space in the past, got burned and are getting out.
“Yeah, we’re seeing office buildings sell for 30, 40, 50, even 60% below what the values were at the top of the market,” Cassum said.
But there are areas of commercial real estate where foreign interest is strong.
“I was just in the Middle East meeting with a lot of the large sovereign wealth funds and big investors. They continue to be interested in U.S. real estate but they are more focused on things like data centers, life sciences, student housing,” Cassum said.
Things that are not office buildings. That foreign interest is helping prop those sectors up while office buildings continue what Cassum calls a slow burn.
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FAQs
Foreign investment in United States real estate is a major source of investment in the United States, facilitated by an open economy legislation (foreign individuals and corporations are free to purchase residential or commercial real estate).
Can foreigners buy commercial property in the USA? ›
Foreigners can buy single family homes and condo units, or invest in commercial real estate. The only common barrier they may run into is if they're looking to buy into a housing cooperative.
Why are foreign investors attracted to real estate located in urban centers? ›
Potential for Appreciation and Yield: Particularly in major cities, real estate offers strong appreciation potential and yields, appealing to both commercial and residential investors.
What foreign country owns most real estate in the USA? ›
Of all foreign-owned U.S. land, Canadian investors owned the most at 12.8 million acres. This makes up 31% of all foreign-owned U.S. land. Four other countries held 12.4 million acres combined, or another 31% of foreign-owned land: the Netherlands (12%), Italy (7%), the United Kingdom (6%), and Germany (6%).
Is America a good foreign market to invest in? ›
The US “is still the most stable country, with a combination of AI/tech-related companies that just has no equal elsewhere in the world,” said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute.
Is it worth investing in foreign markets? ›
However, non-U.S. stocks may be attractive due to lower valuations, higher dividend yields and growth potential in select regions. Investors should consider such investments as an inexpensive way to hedge portfolios against a potential U.S. stock-market pullback.
What percentage of US homes are owned by foreign investors? ›
But the percentage of homes in the U.S. owned by non-Americans is usually pretty small — between 2% and 3%. The percentage of commercial real estate owned by foreign investors is a lot higher — or at least it has been.
Why does the US allow foreigners to buy property? ›
Foreigners are allowed to buy property in the U.S. as part of the country's open-market policy, which encourages foreign investment and contributes to the economy. This policy is not reciprocated in all countries due to various legal and regulatory differences.
What is the property tax rate for foreigners in the US? ›
How is property tax calculated for non-residents? Flat Tax Rate: Income from real property in the U.S. owned by non-resident aliens is generally taxed at a flat rate of 30%. This rate applies unless the income is effectively connected with a U.S. trade or business.
What are the hottest real estate markets in the country? ›
A total of 300 cities were listed. The “hottest housing market” in the U.S., according to Realtor.com's index, is Manchester-Nashua, New Hampshire, followed by Rochester, New York and Springfield, Massachusetts.
The United States real estate market has long been a magnet for foreign investors seeking stable returns and diversification. Despite the challenges posed by the pandemic, international interest in US properties has rebounded, with specific countries leading the charge.
Why do foreign investors hesitate to invest in Central America? ›
The correct answer should be high government corruption. This are has historically been famous for having corrupt governments that exploited people so even if the corruption goes lower, the companies will still have a hard time accepting this and investing.
How many acres does China own in the United States? ›
China owns 384,000 acres of American agricultural land. That's a 30% increase just since 2019. And on top of that, they own land near an air force base in North Dakota.
How much US real estate does China own? ›
Chinese investors owned an even tinier fraction – about 383,934 acres, according to 2021 data requested by NPR. In fact, based on the data, Chinese land holdings account for less than 1% of farmland in any given state where there have been purchases.
Who is the biggest foreign investor in US? ›
According to data from the U.S. International Trade Administration, the main investing countries in the U.S. are Japan (USD 721 billion), Canada (USD 607.2 billion), Germany (USD 498.6 billion), and the United Kingdom (USD 439 billion), with Europe as a whole accounting for USD 2.8 trillion.
What percentage of U.S. homes are owned by foreign investors? ›
But the percentage of homes in the U.S. owned by non-Americans is usually pretty small — between 2% and 3%. The percentage of commercial real estate owned by foreign investors is a lot higher — or at least it has been.
Who is buying U.S. real estate? ›
Our analysis reveals fascinating trends in the U.S. residential real estate market driven by foreign buyers. While China remains a major player, Asian buyers take the lead overall.
Are the Chinese buying California real estate? ›
Their location of choice: San Marino. Rich business people from Mainland China are snapping up high-end real estate in California. Their location of choice: San Marino. Real estate agents there say perhaps 90 percent of all sales are now going to Chinese buyers.
Can foreign investors participate in 1031 exchange? ›
A foreign investor interested in executing a 1031 exchange of real property should consult with their tax, legal, and financial advisors, along with a qualified intermediary, as soon as possible prior to the sale of the property, to ensure that all the requirements/exceptions of FIRPTA are met before beginning the ...
