The U.S. remains a top market sought by foreign investment capital, but traditional and one-off spaces are a thing of the past when it comes to investor appetites. Creative office and industrial spaces situated in thriving job markets are desired by this investor category, according to panelists in a “Global Investment Trends and Opportunities” session at CRE.Converge 2019 that examined the fundamentals of foreign investments.
Moderator Bahram Motamedian, chief strategy officer for USAA Real Estate, presented key topics for discussion for the distinguished panelists, who included investors Laurence Bastien, senior director, real estate investment, PSP Investments, and Ambrish Baisiwala, CEO of Portman Holdings, LLC, along with Audrey Koehn, global interiors leader-principal with DLR Group, an interior design firm.
Why foreign investors remain interested in office and industrial markets in the U.S.
The investor panelists spoke to the fact that the U.S. provides a variety of opportunities for foreign capital, offering multiple assets in cities with diverse growth patterns including financial, energy and tech, to name a few. As with domestic capital, foreign investors have varied preferences. However, for the most part, small to midsized firms are seeking value-add opportunities, while core and core-plus product is largely of interest to the more institutional capital.
Bastien noted that when it comes to being a large allocator of foreign capital, there are not many markets out there that are as stable as the U.S. Because the U.S. provides this stability, overseas investors are generally willing to pay a premium, however, that doesn’t mean they are always the highest bidder. Uncovering value is critical to maximizing an investor’s ROI, and that is directly related to two main factors: location, and the modern design elements and features of the product itself. Ultimately, as many assets are considered value-add, there must be a vision as well as a strategic and viable business plan that is executed with intelligence, in partnership with local market experts. Without an understanding of the local market, projects take on more risk of not succeeding.
Product types are changing
From a design standpoint, whether that is for new developments or redevelopments, Koehn noted that a growing number of industries are seeking creative features and amenities, however, they depend on a company’s culture and industry. For example, tech firms generally desire more recreational-focused amenities and collaborative spaces in order to entice and attract younger talent. Financial companies are seeking collaborative spaces for meetings as well some private office build-outs. Additionally, over the past five or six years, workspaces are getting smaller, and there are more people being put into the same amount of space or using less space so the cost of rent isn’t rising.
Baisiwala echoed the demand for amenities and noted that now, more than ever, he is finding that office tenants are willing to spend more money on tenant improvements.
Shared amenities as well as co-working space within office buildings in the investor portfolio have been evolving as well.
Parking requirements have also been declining, especially near transit oriented projects in urban settings where many young people don’t own a car.
New investment strategies
Finally, as economies are continually evolving, the investor panelists are not making major adjustments to their investment strategies. However, as many gateway cities become out of reach from a returns standpoint, high job growth markets that are affordable for a young, skilled workforce are garnering their attention; Austin, Nashville, Denver, and Salt Lake City were just a few that have attracted capital attention.
Darcie Giacchetto has more than 20 years of experience in public relations and marketing including extensive work in media relations, branding, advertising, writing, marketing collateral and website development. Darcie specializes in all aspects of the commercial real estate industry and has worked with major real estate brokers, developers, investors, government entities, financing companies, property managers and construction clients.