A confluence of global economic trends make 2016 a compelling year for Latin Americans to diversify investment portfolios into U.S. commercial real estate - especially if linked up with professional managers who can target premium opportunities, particularly in markets now getting onto investor radar, such as select suburban office properties.

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The U.S. commercial property market has never been stronger; indeed, the Green Street Advisors’ price index of U.S. commercial real estate touched 122.7 in November, up from an index of 100 in 2008, before the real estate contraction. Moreover, Eastdil Secured recently advised clients that the pipeline of commercial real estate transactions this year is larger than 2015, and that international capital is increasingly active in U.S. markets.

With global stock markets dicey, investors worldwide are hunting security and return—yet 10-year U.S. Treasuries offer a scant 2.0% yield, and other government even less, or even negative yields. Not surprisingly, internationally today we see cash pouring into quality property, but nowhere so much as the United States.

In part, the attractiveness of U.S. property lies in the economy; in January, the World Bank estimated the U.S. economy to grow by 2.7% in 2016, while Europe’s will expand by 1.7%, and Japan’s by 1.3%. Unfortunately, the economies of Latin America and the Caribbean are expected to barely grow at all in 2016, up only 0.1% as a group.

jdmFor Latin American investors there is also the advantage of effective currency hedging in U.S. property. Obviously, U.S. assets will appreciate and throw off income in dollars, thus balancing national currency risks. Worth noting, the U.S. dollar is up about 25% against a mixed basket of currencies in the last 18 months, as central banks worldwide flog economies through monetary expansionism. Somewhat in contrast, the U.S. Federal Reserve raised rates once last year, and has vowed four rate hikes in 2016. Predicting Fed actions is a precarious task, but an even stronger U.S. dollar ahead may be in the cards.

Given the strength of the U.S. economy and property markets, the Fed may be justified in its stance. The U.S. unemployment is close to 5% and generally falling, while consumer confidence is high. The oil slump will cause headline sector troubles, but in general is a tax cut on America and an economic elixir, an aspect temporarily overlooked.

Within a better major economy, the U.S. real estate market is particularly attractive, as demand is more often outstripping sticky new supply. For manifold reasons often involving local zoning laws, the supply of new built space, including office, is often constrained in key markets. Eastdil Secured recently reported that in the U.S. the new supply of office space is 30% below historic norms, which inevitably results in “landlord markets.”

Institutional investors, domestically and globally, are obviously comfortable with Class A urban properties, including office, and those sectors have appreciated strongly in recent years. Asian money, whether flight capital or otherwise, has been evident in trophy properties such as the Waldorf Astoria in New York, or oilfields in Texas.

In 2016 we can expect select U.S. suburban office markets, and choice industrial-warehouse locations, to shine brighter on investor radar, as buyers become more familiar with U.S. property, and seek the better yields available in secondary markets. Secondary markets, such as suburban office structures, offer handsome paybacks, and 3x to 4x 10-year Treasury returns are a reasonable estimate for this year.

And the picture for suburbia may brighten even more, as businesses seek value for their rent dollars in 2016. The brokerage JLL recently reported, “With average Class A rental rates in CBDs 59.1% higher than those in suburbs, suburban markets are awaiting sharper vacancy reductions as pricing encourages tenants to explore suburban opportunities over the next 12 to 24 months.”

Before buying suburban office space, the Latin American should choose an experienced U.S.-based professional—one with a seasoned track record—to develop a relationship with, and then to guide and provide assurance in the investment process, whether through a fund or discrete investment. In general, select suburban property markets are a strong investment choice, but there are regional pitfalls and results can be maximized with knowledgeable execution.


To a large degree, the U.S. has earned worldwide trust of investors. The nation has a relatively stable political climate, deeply established and honored property and contract laws, highly developed professional cadres to facilitate transactions, and a welcoming environment for foreign investment and property ownership.

Emerging nations, including in Latin America, can be buffeted by swings in commodity prices or the vagaries of government. In any market, the best approach for serious investors is to diversify internationally to ensure that assets are not tied to any particular national economic, monetary, or political situation. The U.S. real estate market is today’s best choice for diversification, and indeed, investors globally are already acting on that reality.