WASHINGTON, DC–International buyers and sellers are making their presence increasingly known in the US commercial real estate market, according to the National Association of Realtors 2018 Commercial Real Estate International Business Trends report, which analyzed cross-border commercial real estate transactions during 2017.
It found that nearly one-fifth of its realtors practicing in commercial real estate closed a sale with an international client in 2017, and 35% said they have experienced an increase in the number of international clients in the past five years.
The report also found a growing concentration of such deals in smaller markets.
“The profile of smaller commercial markets is continuing to rise as many foreign investors are attracted to smaller-sized properties in secondary and tertiary markets,” said Lawrence Yun, NAR chief economist — a trend that he expects to see continue this year.
That said, international commercial buyer and seller transactions typically tended to be at the higher end of the market. Last year, the median international buyer-side transaction was $975,000 and a median seller-side transaction was $1 million, while the median commercial transaction was $625,000.
The Transactions, Broken Down
Of the 59% of realtors who indicated they completed a commercial real estate transaction last year (compared to 69% in 2016), 18% reported closing a deal for an international client (compared with 20% in 2016). 46% closed a buyer-side transaction, 13% a seller-side transaction and the remainder closed both types of transactions.
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Over 60% of buyer-side sales were transactions with foreign buyers who primarily reside abroad. Most seller-side transactions (57%) were of properties sold by clients who were temporarily residing in the US on non-immigrant visas.
Top Buying Countries
The top countries of origin for buyers were China (20%), Mexico (11%), Canada (8%) and the United Kingdom (6%). The sellers were typically from Mexico (20%), China (15%), and Brazil and Israel (both at 10%).
Top US States
Florida and Texas were the top two states where foreigners purchased and sold commercial property last year, with California being the third most popular buyer and seller destination.
- International clients found US commercial real estate markets to be a good value in 2017. About seven in 10 respondents reported that international clients view US prices to be about the same or less expensive than prices in their home country, according to Yun.
- Foreign buyers of commercial property typically bring more cash to the table than those purchasing residential real estate. 70% of international transactions were closed with cash, while NAR’s 2017 residential survey found that half of buyers paid in cash.
- For those not using all cash, 25% of commercial deals involved debt financing from US sources.
- A majority of buyers purchased commercial space for rental property (39%) or for business investment purposes (34%).