Austin’s red-hot growth has caught the eyes of global real estate investors: For the first time, the Texas capital broke into the top 10 cities to invest in the Americas in a recent survey from CBRE Group Inc.
While the Lone Star state is booming, commercial real estate investment returns across the continent actually have fallen in the past year, according to CBRE. That has investors “racing to find the next Seattle by increasing their focus on the higher-yield potential of high-growth secondary markets,” wrote Spencer Levy, head of research and economic advisor for CBRE in the Americas.
Austin tied with Toronto, Canada, as the 10th-most desirable place to invest this year. Three Texas metros made the list, with Dallas-Fort Worth ranking No. 2 and Houston ranking No. 4, up from seventh the year before. The annual survey polls 300 real estate investors on their future intentions.
“Seattle is the only market I’ve ever seen advance from a secondary to a primary market status,” Levy wrote. (Seattle tied with New York for third place this year). “There are few other secondary cities that are close to repeating Seattle’s feat, led by Austin, Denver and Nashville in the U.S. and Sao Paolo, Brazil and Montreal, Canada in the Americas.”
Rising rents and property prices, robust job growth — unemployment was 3.1 percent in March — and a growing population have spurred an influx of investors to the Texas capital.
Over the past two years, the top five investor groups that bought commercial real estate in the Austin area were domestic, with the top four companies being outside of Texas, according to data from Real Capital Analytics cited by CBRE. Three international buyers were among metro Austin’s top 10 last year, from Singapore, China and Canada, CBRE added.
Robert Kramp, director of research and analysis at CBRE, declined to release specific company names to Austin Business Journal but he said institutional investors, real estate investment trusts, pension funds and private equity have all been active in Austin.
Just last week, Pacific Investment Management Company LLC announced that it had selected Austin for its third U.S. office. The investment-management giant, with $1.77 trillion in assets under management, said it chose Austin to tap into the area’s deep tech talent pool and to reach new clients.
Overall in the Americas, investors are optimistic about commercial real estate and expect to boost purchases by about 45 percent from the previous year. For the second year in a row industrial space is the preferred asset, with half of the respondents saying it was their top choice for investment. Multifamily and office followed in that order for the second consecutive year.
Check out this story from 2016 about Turkish investors interested in Austin real estate, and go here to read about how the Chinese government came to control the owner of the Four Seasons Hotel Austin property.