EB-5 Foreign Investment in Texas Commercial Real Estate
Around the world, investors have steadily increased their real estate investments leading them to commercial real estate brokers in new markets. As a result, the year 2015 saw a record number of foreign investments in US real estate as more investors from places like China, Mexico and Canada looked for places to park their money. Across all sectors, total foreign investments in the US was over $420 billion in 2015. Much of this investment was to take advantage of the EB-5 VISA program.
However after a record high year, a report from Real Capital says that foreign investment in U.S. commercial real estate dropped by 33% from the 2015 high point during the fiscal year ending March 31, 2016. Yet even though the rise of the dollar has made commercial property more expensive for foreign investors, the level of foreign investment in real estate still remains high in the US.
A Switch to Secondary Office Markets
In previous years, foreign investments were concentrated in ‘gateway cities’ like New York and San Francisco. However, in the past few years, investors moved beyond the coastal cities into secondary markets like Dallas and Phoenix where in 2016, Bahrain’s sovereign wealth fund purchased a 49% stake in seven office buildings in these two cities.
As foreign investors look further inland to diversify their holdings, states like Texas become more and more attractive. Currently, when looking at total sales volume, Texas surpasses both the state of California as well as the national average for foreign investment. Only New York has seen anywhere near the same levels as foreign investment as Texas since the Great Recession. According to Bis Now:
Last year, foreign buyer sales volume exceeded $5B in the Lone Star State, or about 15% of all sales, according to CoStar. That is a huge leap from 2008 and 2009, when foreign investment accounted for less than 2% of all sales volume in Texas.
Due to the relatively low cost per square foot, industrial properties in Texas are especially attractive to foreign investors. In 2015, $3.1 billion of foreign capital was invested in industrial properties in Texas. $4.6 billion was invested domestically the same year.
Texas’ Investment Advantages
More than 1,500 foreign corporations have operations in Texas. Since 2011, over half of these foreign investments came from western Europe with the UK as the leading investor. One of the main questions to answer is why Texas’ attract so many foreign investors.
The Lone Star state is a favorable location for these corporations and investors for a number of reasons. Centrally located in the nation, Texas has extensive railways and highways for access to the rest of the country, The state also has 11 deep water ports and 28 border crossings with Mexico and has led the nation in exports for the past 14 years. In addition, Texas has the 10th largest economy in the world and is home to more than 50 Fortune 500 companies. Is also has 13 million civilian workers, the second largest civilian workforce in the US. Not only that, but Texas has also no state-level corporate taxes and no state income tax.
Texas: The Place to Invest in Commercial Real Estate
Texas has increasingly drawn the eye of foreign investors who look beyond gateway cities to diversify their real estate holdings in the US. In 2015 alone, foreign investors spent billions of dollars in Texas. Since 2015, a strong dollar, rising prices and questions about politics put the brakes on the influx of new foreign cash. Yet money continues to flow into the US from abroad, albeit at a more moderate rate than in 2015 with Texas real estate being one of the main beneficiaries of this influx of capital.