Foreign Capital in CRE

The United States continues to draw foreign capital to its commercial real estate. Where, exactly, is it going? To New York for starters. Also, higher interest rates, shifting cap rates and inflation are making once liberal commercial real estate lenders more conservative. This could be the situation for a while.

These stories are part of our Daily Round Up, Click here to get it delivered straight to your inbox.

— Tom Acitelli, Co-Deputy Editor

Manhattan Bounces Back in Global International CRE Activity Amid Challenges

Manhattan is back in the New York groove in terms of being the top U.S. commercial real estate market for international investors a year after falling to third place and despite headwinds in the office market. A recent report from MSCI Real Assets showed that Manhattan was once again in the No. 1 spot in foreign CRE international activity with a 279 percent increase in the first six months of 2022 compared with the prior four quarters. In 2021, the Big Apple slipped to third place behind Atlanta and Boston as investors grappled with concerns about the future of office properties amid rising vacancies and remote work trends. Those uncertainties remain, but a number of international players have planted flags in New York this year. Manhattan cross-border CRE volume was at $1.14 billion in the first half of 2022, largely from Asia and Europe, according to MSCI. Last year’s total global activity for Manhattan numbered $3.78 billion, with a big uptick in the second half of the year as the economy opened up more from pandemic restrictions.

Read the rest of the story

CRE Debt Markets Hit Stormy Waters Amid Rising Interest Rates

If the commercial real estate lending climate from 2012 to mid-2022 was the Titanic out of Southampton, England — sleek, agile, strong and seemingly invulnerable — the last six months have been the first hour after the ship hit the iceberg. Panic has set in, and the band’s striking up “Nearer My God to Thee.” One year after record lending volume during what seemed like a joyous recovery out of COVID, the debt markets began to tighten in the second half of 2022. The culprit, of course: uncertainty over how high the Federal Reserve will raise interest rates to fight inflationary pressures and an impending recession. The debt markets began to dramatically change when the Fed increased its benchmark federal funds rate 75 basis points on June 15, marking the central bank’s first three-quarters of a percentage point hike since 1994. It followed up with two additional jumbo rate hikes in August and September, bringing rates to a range of 3 percent to 3.25 percent compared to the near-zero short-term borrowing conditions in early 2022, with no indications of letting up on the hawkish strategy anytime soon.

Read the rest of the story

---------------------------------------------------------------------------------

Enjoying these stories on all things CRE? Unlock unlimited access to our content with a subscription. And for a daily version of this newsletter, sign up here.