Financing a Commercial Real Estate Investment through Capital Markets
If you are looking at financing a commercial real estate investment through capital markets you are in an unprecedented market where capital is available across many different platforms. Here are a few options available to you as a commercial investor:
FOREIGN CAPITAL
Since 2015 capital coming from foreign investors eclipsed $91 billion dollars. This used to be primarily in major metro areas, but we are now seeing this trend in the secondary and tertiary markets as well, with China placing over $17 billion alone. Overall, China invested almost $208 billion in CMBS according to Rosen Consulting Group. This capital movement is based on a stronger US dollar, job growth and higher inflation.
HIGH NET WORTH INDIVIDUALS
This is a great target audience for investments around the “buy and hold” strategy as they try to go for investments that are lower risk and higher long term growth. Findings show that most of their investment comes from REITs and higher portfolio positions. There are now more than 2,000,000 HNWI in the US alone with over $3,000,000 in net worth.
PENSION PLANS
Commercial real estate is seeing a major uptick in pension funds buying into long term strategies around commercial real estate. Pension plans are focused on strong income potential. The focus seems to be on the industrial market based on projected yields in 2017.
CROWDFUNDING
This is a great opportunity for people to invest into outside the box investments that traditional investors tend to stay away from. The NAR shows that crowdfunding has opened the door to commercial real estates $7 Trillion market to 98 percent of the potential unaccredited investors market. While investors benefit from deductions and lower fees they do carry a higher risk and longer payout cycle. With Millennials coming into the market and leveraging technology it is safe to say that online capitalization is here to stay – the only question is how large the pool will get!
The commercial real estate market continues to become more global as outside investors have been sitting on sidelined money and feel now is the time to get into the CRE market. These investment plays are at record highs and are fully expected to increase. When you start to factor in the potential changes at the legislative level we expect continued growth across all of these platforms.
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Phil Kubat is the Principal & Managing Broker of Transworld Commercial Real Estate, a commercial real estate brokerage firm in Colorado. Phil, a veteran in the Colorado commercial market, brings 15+ years of experience to his work with Transworld Commercial Real Estate (TCRE). TCRE serves as a strategic partner to clients for their commercial acquisition and disposition needs. Phil specializes in Leasing & Listing Sales Representation; Tenant & Buyer Representation; Corporate, Franchise & Franchisee Location Services; Co-Brokering with Franchise & National Firms; and Office, Industrial/Flex & Retail Site Selection.
