INDUSTRY VOICES
By Nicholas Leider
THE VIEW FROM ABROAD
It ’ s a bit cliché at this point , but the world
seems to have lived a lifetime in the past
12 months . A year that started with some storm clouds on the horizon , 2020 was struck by a squall no meteorologist ( or economist ) could have forecast . But the world is now a full year into the COVID-19 pandemic , and many are looking for a bit of calm after the storm .
Maggie Coleman , managing partner with BFIN , where she leads the Private Capital Authority real estate platform , is a go-to expert when it comes to cross-border investment among global regions and across asset classes . While turbulent times are certainly not over , she sees reason for optimism . The United States was battered by COVID-19 , but
Maggie Coleman the American economy is still the gold standard when it comes to stability — something that was important to foreign capital in need of safe harbor .
“ Capital flows from offshore investors have been relatively consistent in the U . S . market , in spite of what we saw throughout 2020 ,” Coleman says , referring to economic , social , and public health upheaval . “ When you think about the longterm perspective of many global investors , the U . S . remains very transparent . I would venture to say , going forward , you ’ re still going to see global capital looking to the U . S . for attractive investment .”
While the U . S . response to the COVID-19 pandemic has been widely seen as less than perfect , Coleman reiterates the overall strength of the American economy . For historical perspective , she notes how investment was not deterred during previous threats of instability , such as the inherent uncertainty during the Cold War . The U . S . represents roughly a quarter of the global economy , and it remains stable in relation to other regions .
Plenty of international dollars flow into the gateway markets of New York , San Francisco , and Los Angeles . But the variety of other markets make the U . S . appealing as a destination for investors .
“ There are 50-plus markets that are pretty strong metro areas for replacement capital in real estate ,” Coleman says . “ This creates variety for investors who are looking for , in particular , different risk profiles . Also , a huge factor is that there ’ s liquidity , so again , as part of capital preservation , you can be pretty sure you can get your capital out .”
One often overlooked player in American CRE is Canada , a huge source of cross-border investment . Because of its proximity , Canada seems a part of a larger North American CRE market , but it often looks to invest south of its border because its CRE industry is relatively small .
“ Canadian pensions are some of the largest buyers and investors in U . S . real estate ,” Coleman says . “ They need to look outward and that includes Europe and Asia , but funds continue to see the U . S . as a natural fit .”
Flashing back to March 2020 , as the pandemic shuttered much of the U . S . economy , capital didn ’ t completely freeze in CRE . One interesting consequence of travel restrictions and shelter-in-place orders was that international investors had teams that remained in major markets exploring potential deals in their immediate area . If a firm had an office in San Francisco , for example , the natural inclination was to start investigating deals within driving distance .
As the spring progressed , high net worth investors began to look at placing capital in different sectors in the United States . Retail and hospitality were decimated immediately , so investors looked to industrial as a safe haven .
“ Private capital looked at small industrial assets , especially those with any e-commerce-backed tenant ,” Coleman says . “ Over a time frame of , say , 10 years , you ’ ve got a fixed return with a relative amount of security , considering the strength of e-commerce .”
Moving into 2021 , CRE is going to be another kind of “ different ” — challenges from 2020 will remain , but hope of “ normal ” may grow as vaccinations increase .
“ This year will give us some line of sight to what the other side of COVID-19 looks like ,” Coleman says . “ CRE is facing plenty of challenges , but opportunities are out there . I don ’ t know if I can say things will necessarily get better , but I ’ m hopeful for the future .”
Nicholas Leider
Senior content editor of Commercial Investment Real Estate Contact him at nleider @ ccim . com .
Editor ’ s note :
This article is an adapted excerpt from a fulllength Commercial Investment Real Estate podcast . To listen to the full episode , head to SoundCloud , iTunes , Spotify or wherever you listen to your favorite podcasts .
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COMMERCIAL INVESTMENT REAL ESTATE MAGAZINE WINTER 2021