Since the beginning of this economic cycle, after the Great Recession, a very interesting phenomenon has occurred in the commercial real estate market in Miami.
In the last seven years, foreign capital, especially in Latin America, has turned fiercely to the purchase of commercial properties.
As of 2015, foreign investors began to lose their appetite for the condominiums that were being built in the most expensive areas of Miami and began to invest in office buildings, shopping centers, multi-family buildings, hotels and industrial properties. From there, many of my clients, which generally look for properties that are easy to manage from a distance, began to favor single-tenant properties, occupied by national high-credit companies such as McDonald’s, Walgreens, Starbucks or other business chains. recognized. These properties are generally administered by the tenant and the investor’s job is only to collect the monthly rent.
The profile of these buyers varies, but most of them include asset managers, family businesses, private equity funds and high net worth individuals who seek to diversify their investment portfolio to protect and grow their capital. For them, investing in this type of property is like investing in a bond, with a return that in current markets fluctuates between 5% and 8%.
This change in the behavior of foreign investors and their new interest in properties that generate a cash flow became evident in 2015. That year, almost US $ 2 billion in commercial transactions involving foreign capital in Miami were carried out. The previous year, that number had barely reached almost US $ 500 million, according to information from Real Capital Analytics, which provides data from the US commercial market. This year, the volume of these transactions has reached at least US $ 1 trillion. Due to the fact that the economy has strengthened a lot in recent years, the properties have been valued quickly, which has caused a slight deceleration of these foreign investments. The most active investor segment at this time are those looking for properties between US $ 1 million and US $ 20 million, in part, because these properties are easier to finance.
Currently, there are banks available to make loans to foreign investors that buy commercial properties well located and occupied by tenants with good financial backing. Being able to finance a property makes the investor need less of his own capital, especially when his currency has lost value against the dollar and thus be able to mainly leverage his available capital. Although interest rates have begun to rise, they remain low compared to other decades.
The appetite for commercial properties remains strong in Miami and in South Florida. Currently, I am promoting a property in the city of Doral, near the Miami airport, occupied by Starbucks and the reaction is how I expected it: foreign investors are those who have shown more interest in this building.
Now that foreigners have discovered Miami’s commercial real estate market, they are here to stay. The rapid recovery of the real estate market, after the worst recession ever seen, has shown them that investment in Miami is safer, regardless of where we are in the real estate cycle, in the face of the economic and political ups and downs of their countries.