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Benjamin Mark Cole is a contributor to Real Estate Southern California, from which this article was excerpted.

Living in Southern California, it is easy to forget that there are other real estate markets, and even more so that anybody would want to invest in them, especially when said properties are overseas, halfway around the globe.

But US investors are, in fact, going offshore like never before. In 2000, US real estate investors put a little more than $5 billion into European properties. By 2006, however, that level had jumped fourfold to more than $20 billion. And the curve looks to be getting steeper. “Economic growth worldwide has been strong, especially in Asia,” explains Delores Conway, director at the USC Lusk Center for Real Estate. “Those strong growth rates attract capital. Moreover, everywhere there is too much capital looking for a home, looking for returns. Real estate offers security, and returns, and the ability to leverage. And, if you are in the US markets, you also want to diversify.”

So much capital has crisscrossed borders that the search for higher, double-digit “cap rates”–a reason sometimes cited for buying foreign property–is like hunting for wooly mammoths, at least in a country attractive to institutional capital.

According to a study released in March by Rreef Research, cap rates are becoming homogenized, and globally. In 2000, average cap rates on office space in the US were above 8%, while the same rates were below 6% in Europe, according to Rreef. Since then, the large movement of capital into real estate has depressed cap rates worldwide, but also compressed international cap rates into a small zone between 5% and 6%. Indeed the only outlying major city today is Moscow, where cap rates soar north of 10% largely due to perceived risk. Tokyo is the lowest, with cap rates under 4%. But the rest of the developed world is bunched up around 5% to 6%.

But, watching investment flows is sometimes like watching ocean liners. Once an asset class gains favor, the money tends to keep pouring in, even after the fundamentals have shifted. And besides, professional investors usually believe they can out hustle the average player and deliver stellar returns despite a flatter global investment landscape. In the real estate world, hardly a day passes anymore without an announcement of a major US private equity fund, pension fund or institutional investor making a move to acquire offshore properties.

Some recent examples:

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