Foreign Investment at Highest Rate in About a Decade

Miami Tower

MIAMI—Cross-border capital flows into the US have risen dramatically over the past two years—and foreign investment in South Florida commercial real estate hit its highest rate in at least nine years, according to a new report by CBRE Group . Florida ranked fourth in the nation in terms of cross-border investment volume in 2015 and the state improved to rank third in the first quarter of 2016. Foreign buying is projected to cool slightly in 2016 relative to 2015, but remains elevated relative to historical rates. Titled, “Florida: A Destination for Global Capital,” the report outlines the factors attracting foreign investors to Florida. The state’s rapidly growing population and economy, the global brand of its major cities, and strong cultural and economic ties to Latin America and beyond are among the key factors. In 2015, cross-border capital flows into Florida reached $4.3 billion, a high-point for the cycle thus far and up 85% over 2014. In South Florida, foreign capital surged in 2015 with nearly $2.6 billion in sales volume. The 2015 total represents a 65% increase over the previous year. “Florida has been an attractive destination for foreign buyers thanks to its high rates of job creation and economic growth,” says Quinn Eddins , director of research and analysis at CBRE Florida. “And perhaps equally important is the fact that Florida cities, especially Miami and Orlando, have strong global brands and are familiar to investors all over the world. With their strong economic performance and international renown, it is not surprising that Florida’s cities have been so successful at attracting foreign investment to their commercial real estate markets.” Foreign investment in Florida is expected to moderate compared to 2015, according to the report, but will remain elevated relative to historical transaction volumes. Heightened uncertainty in the global economy will enhance the allure of US markets as safe havens for global capital. Primary gateway markets will receive the most interest from foreign buyers, but Florida, and Miami in particular, should benefit as well, the report concludes. “The returns on commercial properties today generally outweigh the cost of the stronger dollar for private capital from Latin America,” Alex Zylberglait , senior vice president in the Miami office of Marcus & Millichap , tells GlobeSt.com. “To many family offices , asset managers and high net worth individuals, investing in Miami and the US is part of their strategy to diversify their assets and risk manage their portfolio. Consider the following trends in cross-border investment in South Florida real estate CBRE identified:

• Canadian investors have been the most active, followed by significant investment activity from Germany and Spain.
• Since 2007, South Florida’s retail and hotel markets have each attracted nearly $2.4 billion in cross-border capital, more than any other property type.
• In 2015, office properties attracted the greatest cross-border sales volume with $630 million in acquisitions.
• Miami leads the region both in terms of sales volume and transaction count, followed by Broward County and Palm Beach County. Miami has also experienced higher average annual growth in cross-border capital since 2007.
• Chinese developers established a foothold in Miami in 2014, increasing familiarity with the market among Chinese investors. More Chinese capital is expected to follow as financial market liberalization at home allows investors to increase the international diversification of their portfolios.
• Foreign investment in Broward County commercial property reached $560 million in 2015, marking the second consecutive year in a row in which foreign capital flows exceeded half a billion dollars.
• Since 2007, Canadian investment in the Broward County market has reached $1.2 billion, representing nearly 49% of all cross-border investment during the period.
• Cross-border investment in Palm Beach County real estate increased significantly in 2015 but not enough to exceed the previous peak in 2007 when foreign investment reached nearly $320 million.
• Canadian buyers have been the most active in the Palm Beach market since 2007, having invested over $427 million, or 29% of the total foreign capital investment in the market.