There’s been an interesting turn of events in the U.S. real estate investment trust (REIT) industry.
REITs raised billions of dollars after the crisis, in order to buy from an expected deluge of distressed commercial real estate properties.
However, they’re still waiting for the fire sale which never happened, or at least hasn’t happened yet.
Flush with cash nonetheless, they’ve begun snapping up properties in other countries, which for many is a radical expansion of their investment scope.
The new appetite for overseas investments is partly fuelled by the enormous amount of cash public real-estate companies have raised in the past two years for acquisitions. Real-estate investment trusts sold $34.6 billion in debt and equity in 2009 and more than $35.3 billion this year partly for investments. Relatively few properties have been put on the block because values still are well below their peak and banks are trying to avoid fire sales.
Also underlying the trend: Emerging similarities in global hubs such as London, Paris, New York, and Washington that some U.S. landlords believe they can exploit. Big banks and other multinational companies have offices in major financial centres around the world, and many may be interested in having the same landlords in New York and in Tokyo, some company executives believe.
So while there’s massive appetite to buy U.S. commercial properties, there just aren’t enough for sale, or prices aren’t as distressed as REITs had hoped for. This makes going international far more interesting.