Foreign investors have been bidding up the price of commercial real estate, especially in the large gateway cities of California. Los Angeles and San Francisco have been the scene of large influxes of foreign money for industrial properties, accounting for a large portion of the $61 billion spent by foreign real estate investors in the United States since 2010. The competition created by deep foreign pockets and large institutional investors has often priced high-net-worth individuals and families out of these markets. However, opportunities still exist for smaller players in the secondary and tertiary markets away from the high-profile urban centers.
One real estate financier recommended that high-net-worth investors seek out multifamily properties that cost below $10 million in smaller markets that need remodeling. As value-added properties, they tend to not attract as much attention from larger investors that hesitate to take on the remodeling or redevelopment that smaller properties require. The chair of a real estate law firm noted that foreign investors generally want to stay in the major cities with which they are familiar.
An equity director of a commercial real estate company said that high-net-worth investors have the ability to outbid locals in smaller markets. These individuals also usually avoid competition from foreign investors in secondary cities, where properties present less liquidity than what foreigners desire.
Anyone who is planning to purchase commercial real estate will likely want to consult an attorney during the negotiation of a deal and the completion of such a high-value transaction. A lawyer could scrutinize property disclosures and alert an investor to issues related to zoning, title problems, environmental regulations or tax liens. An attorney also could review and develop the terms of the purchase agreement and financing. These legal insights could help an investor understand liabilities and meet long-term investment goals.
