Commercial real-estate prices have reached record levels in cities around the world as investors take advantage of low interest rates. Buyers from China and in the Middle East have been particularly active making purchases in the U.S. and other markets worldwide, The Wall Street Journal reported.
The valuations of office buildings sold in London, Hong Kong, Osaka and Chicago during the second quarter of 2015 hit record highs, on a price per square foot basis, while prices in New York, Los Angeles, Berlin and Sydney surpassed post-2009 highs, according to industry tracker Real Capital Analytics.
Deal activity has increased too. The value of U.S. commercial real-estate transactions in the first half of this year rose 36 percent from a year earlier to USD225.1 billion, according to Real Capital. Transaction values in Europe increased 37 percent to EUR135 billion which is the best start to a year in the region since 2007.
Commercial real estate has become an attractive proposition to investors because of low interest rates and a flood of cash being pumped into economies by central banks. Buyers from Asia and the Middle East have become more prominent in the real estate market while U.S. investors continue to be big players.
The appeal of commercial real estate, especially in major cities where economies are growing strongly, is due in part to historically low interest rates that allow for higher return yields than other investments like bonds.
Foreign investors in particular have been jumping into the market recently. China’s Anbang Insurance Group in February paid USD1.95 billion for New York’s Waldorf-Astoria, a record price for a U.S. hotel. Another Chinese insurer, Sunshine Insurance Group Co., purchased New York’s glitzy Baccarat Hotel in May for more than USD230 million.
China has also made a wide range of purchase in Asia-Pacific and Europe. Its sovereign-wealth fund bought nine office towers in Sydney and Melbourne, as well as 10 shopping centers in France and Belgium earlier this year.
