Foreign funds in California real estate

Nearly one-fifth of Realtors practicing in commercial real estate closed a sale with an international client in 2017, and 35 percent said they have experienced an increase in the number of international clients in the past five years.

That was one of the conclusions found in a recent report from the National Association of Realtors, titled 2018 Commercial Real Estate International Business Trends, which analyzed cross-border commercial real estate transactions made by Realtors during 2017.

The study found that most Realtors who specialize in commercial real estate reside in smaller commercial markets where the typical deal is less than $2.5 million.

“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, bringing Realtors confidence that increased sales and leasing activity will continue to occur in 2018,” said Lawrence Yun, NAR chief economist.

“Since 2016, world economies have regained their footing and have pressed toward higher ground. Global economic output increased in 2017, and commercial real estate continues to be a healthy investment for global investors,” Yun said.

Over 60 percent of buyerside sales were transactions with foreign buyers who primarily reside abroad. Most seller-side transactions (57 percent) were of properties sold by clients who were temporarily residing in the U.S. on non-immigrant visas.

The top countries of origin for buyers were China (20 percent), Mexico (11 percent), Canada (8 percent) and the United Kingdom (6 percent). Sellers were typically from Mexico (20 percent), China (15 percent), and Brazil and Israel (both at 10 percent).

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 commercial buyer and seller transactions typically tend to be at the higher end of the market. Last year, the median international buyer-side transaction was $975,000 and a median sellerside transaction was $1 million, while the median commercial transaction was $625,000.

“Realtors’ international clients found U.S. commercial real estate markets to be a good value in 2017.

“About seven in 10 respondents reported that international clients view U.S. prices to be about the same or less expensive than prices in their home country,” Yun stated.

The survey also found that foreign buyers of commercial property typically bring more cash to the table than those purchasing residential real estate. Seventy percent of international transactions were closed with cash, while NAR’s 2017 residential survey found that half of buyers paid in cash.

M. Dean Vincent is the 2018 Chairman of the Santa Clarita Valley Division of the 10,300-member Southland Regional Association of Realtors. David Walker, of Walker Associates, co-authors articles for SRAR. The column represents SRAR’s views and not necessarily those of The Signal. The column contains general information about the real estate market and is not intended to replace advice from your Realtor or other realty related professionals