New York and San Francisco have been enjoying the commercial real estate boom with their soaring prices and it seems that the booming market is going to be around for a while even if the Federal Reserve would increase their rates this week, says one expert, Rhonda Schaffler of The Street reports.
"There's still massive liquidity. That liquidity is not going away anytime soon, and it's pointed right at the United States, whether it be U.S. investors themselves or foreign investors," according to Brian Ward, president of Capital Markets at Colliers International.
Ward is forecasting the commercial real estate transaction volume to hit the $500-billion mark this year, a mark that is close to that hit in 2007, right before the financial crisis. He also pointed out how foreign investments contributed to the growing demand. "Of the $500 billion, I wouldn't be surprised if we saw roughly $50 billion to $60 billion coming from global sources, of which $10 billion to $12 billion could be Chinese," said Ward.
"Now compare that to last year, the Chinese were at about $3.8 billion. So you can see just massive, massive increase from the Chinese, and really foreign capital in general." Industrial and multi-family sector deals are said to have led the transactions, says Ward. Also, there is a surge of foreign investments coming to the hotel sector. Austin, Dallas, Miami and Atlanta, which are beyond the coastal markets, have also attracted a significant number of investors.
This attention on the U.S. market can be attributed to the recovering economy, amid the continuous challenges that the rest of the world is facing, according to Ward. On Wednesday, the Fed is expected to bring its rates higher, but Ward believes that they will be "one and done", and that the country's real estate market will continue to sponge in money and investments.
On whether there is a threat of a bubble for commercial real estate market, he responded, "bubble is hard to say. I think we're certainly in a mature part of the market cycle."
