Even if it sounds cliché, the United States has proven itself as the land of opportunity—for commercial real estate markets, at least. Foreign investors have staked their claim on gateway cities and now represent $2 of every $5 invested in U.S. skyline property, according to JLL’s recently released 2015 Digital Skyline (registration required). Those cross-border dollars invested in 2014 represented more than 150 percent growth from 2013 when it came to trophy and class-A properties where investors and tenants alike tend to focus their demand.
The overwhelming majority of this capital is being invested in premier coastal hubs like New York, San Francisco, Boston, Seattle and Washington, DC. Indeed, of the $12.1 billion in foreign real estate investments made in 2014, JLL shows $11.3 billion settled in these cities. A few international buyers, however, are showing willingness and even an inclination to move inland amid the competitive heat in these markets.
The main criteria for investing in top inland markets centers around the presence of a strong, diversified economy. Denver is a notable example. JLL research shows the Mile-High City had four cross-border transactions amounting to $206.7 million in 2014. That number is even higher when counting deals that combine foreign capital and local operators: nine transactions totaling $392.3 million in the same year. It’s undoubtedly small potatoes compared to New York or San Francisco, where individual deals often exceed this amount by multiples. For Denver, however, this international activity represents a spike relative to its historical trend.
Transactions involving core assets in Denver’s downtown and southeast sub-markets are receiving global capital interest, and there’s a confluence of factors driving that interest. The economy has diversified away from the energy markets in recent years, with more technology and healthcare firms in particular moving into the metro area. Denver also topped the charts last year for millennial migration, which has, in turn, encouraged more corporations to establish regional offices in the city. Denver has moved from a second tier market to a first tier, non-gateway city that is providing slightly higher yields.