5 Actionable Ways CRE Brokers Can Tap Red-Hot Foreign Capital Pools

Published: 09-26-22    Category: Insight

MyEListings' markets and economics editor and creates content about global macro events and their impact on US commercial real estate.

Foreign currency

Foreign investment capital is quickly flowing into US dollar-denominated assets, including commercial real estate. Moreover, it plows past the traditional entry markets and into secondary and tertiary cities. This represents an outsized opportunity for agents and brokers to court, educate and serve these investors. Here, we’ll look at the macro drivers propelling this phenomenon, and identify actionable steps brokers can take to tap into it.

Why Are Foreign Investors Buying Dollar Assets?

Foreign investors face several impediments US investors do not in calculating a suitable ratio of potential return-to-risk. Among these are a greater perceived risk deriving from geopolitical conflicts, ongoing currency machinations, and violent demographic implosions in other parts of the world that are simply not present, at least to the same degree, in the US.

What Factors Are Driving Investors Acutely Into Dollar Assets?

First, relative currency valuations. As the Federal Reserve continues to hike short-term interest rates, longer-term rates and their derivatives, including cap rates, must rise themselves or shunt the pressure to rise into other channels.

Second, geographic and geopolitical security. The US is physically isolated from the rest of the world, giving it the advantages of not needing to maintain a standing army on its borders and being able to grow without fear of invasion or conflict that physically disrupts domestic commerce. It can project power globally, thus keeping conflict both handled by proxy and away from its shores. This inherent stability is buttressed by rising rates, lower inflation, and the dollar’s status as the world reserve currency.

Lastly, the stability of key geopolitical actors such as Russia and China is in major jeopardy. Both countries are in terminal demographic decline, have governments desperate to maintain their hold on political power, and are invested in various levels of conflict, from saber-rattling to kinetic warfare, at present. This encourages capital flight, and dollar assets are relatively easy to transition to, secure and on the appreciating end of most currency crosses.

Why Is Issuing The Reserve Currency Important?

The US dollar is the world reserve currency, which means countries besides the issuing country use it to transact between themselves due to a lack of transaction costs, ease of use, and value retention vs other currencies. Most oil purchases, for example, are transacted in dollars rather than the local currency, regardless of the identity of the buyer and seller. Nearly every nation is therefore a stakeholder in the US dollar in some respect.

Where Are The Greatest Pools Of Foreign Capital Investing In US Commercial Real Estate?

The relative sizes of where foreign investment comes from into CRE have shifted in recent years. Specifically, investment coming directly fromO China has dwindled and has been more than supplanted by funds from Singapore, and Canadian investment has increased considerably.

How Can US Brokers And Agents Take Advantage Of Foreign Interest In US Commercial Property?

Foreign investors have several acute needs and interests that have been colored by recent developments including the pandemic. Here are five ways brokers and agents can serve these needs and gain the trust of investment managers:

  1. Offer your infrastructure and expertise in establishing a satellite presence for foreign funds. During the pandemic, foreign investors that already had a physical presence in the US were able to operate smoothly and without travel restrictions imposed on those outside the US. This is at the top of the mind for many foreign investors.
  2. Engage investors with value-added, consistently astute advisory services. Foreign investors are at arm’s length from the minute details and nuances which comprise risk and that you can add value by supplying.
  3. Create plug-and-play, done-for-you facilitation conduits that enable investors to save time in dealing with financiers and underwriters.
  4. Create strategic partnerships with foreign fund managers looking to invest in CRE assets. Be their eyes, ears, and hands in seeking and finding value for their investors.
  5. Make referrals a requirement for doing business with you, as you reach key milestones in serving their needs.

Conclusion

Where foreign flows of capital into dollar assets normally ebb and flow continuously, due to current world demographic structures, resurgent US unipolarity in the world economy, and the stability of the US currency, current flows of foreign capital are surging into commercial real estate, and are likely to grow for the foreseeable future. These flows are charging past gateway cities and into second and third-tier locations, and the managers behind these funds would be well-served by the expertise of US brokers reaching out to offer their expertise and assistance.

Other articles in Insight


An RV in the middle of a field.

The Economics of RV Park Campgrounds: Revenue Streams and Financial Considerations

Discover the lucrative potential of investing in RV parks & campgrounds for hands-on managers. Explore revenue streams & cost-saving strategies....


A land parcel during sunset.

Where's the Best Place to Buy Land?

Discover the top 5 locations for lucrative land investments in 2024, from Montana's vast opportunities to Florida's tropical allure. ...


An empty office

Return-to-Office Could Mean Less Revenue Growth

Learn how strict return-to-work policies impact company revenue growth, contrasting with the financial advantages of remote work....


A key in a door

How the Residential Market Informs the Commercial Market

Residential markets provide valuable feedback as well as initiate information flows to commercial markets. We explore how, here....

Other recent articles


A flight of beer sits on a bar.

The Rise of Craft Breweries and Specialty Beverage Production Facilities

Explore the evolution of beer from ancient times to modern craft breweries. Learn about trends, investments, and real estate for beverage production....


The inside of a self-storage facility.

Hidden Gems: Unearthing the Potential of Self-Storage Facilities

Discover why self-storage investments offer low-maintenance, high-growth opportunities in today's real estate market....


The Bok Building in Philadelphia.

Beyond the Classroom: Reimagining Educational Facilities for Profit

Discover profitable opportunities in repurposing vacant schools. Learn from successful examples and strategies for transformation....


We see a Car Wash sign against the sky.

Car Wash Lease Negotiation Tips for Tenants and Landlords

Invest in the booming car wash industry with valuable insights for investors and landlords. Grow your portfolio today....

Article Search

Share

All Article Categories

• SUPPORT OUR FREE PLATFORM •
The below vendors allow us to provide our platform at no cost. Please consider their services when needed.
Plumbing Contractors
Get it all flowing again with a click!
Pest Control
Click for a pest-free workplace
Electrical Contractor
New or existing work, get a quote!
HVAC Contractor
Click to stay cool this summer
Roofing Contractor
Repair, replace, maintain. Click here!
Electrical Contractor
New or existing work, get a quote!
Appraisal Company
Proper valuation for buying or selling
Pest Control
Click for a pest-free workplace
Commercial Surveying
Schedule your survey today!
Electrical Contractor
New or existing work, get a quote!
Environmental Studies
Environment Site Assessments
Environmental Studies
Environment Site Assessments
Painting Contractor
Roofing Contractor
Repair, replace, maintain. Click here!
Title Company
Talk to an escrow officer today!
HVAC Contractor
Click to stay cool this summer
HVAC Contractor
Click to stay cool this summer
Landscape
Roofing Contractor
Repair, replace, maintain. Click here!
Roofing Contractor
We'll Fix Your Roof! Schedule Now!