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Houston's real estate market continues to attract foreign investors

October 30, 2014

Foreign investors have always liked buying real estate in major markets like New York and San Francisco.

However, as these so-called "gateway markets" become saturated, foreign investors' interest is shifting to other markets — like Houston.

"We're seeing a lot of interest in Houston," said Bernard Branca, CBRE Group Inc.'s senior vice president specializing in office investments. "We do offer that yield premium over other markets."

Asian investors, particularly those from China, Singapore and South Korea, are "pushing asset values above previous peaks," Branca said. Earlier this month, Chinese insurance company Anbang Insurance Group Co. purchased New York's iconic Waldorf Astoria hotel for $1.95 billion.

The steep real estate values in these big gateway markets is pushing foreign investors to Houston, where they can get into "trophy properties" – luxury hotels and offices – at a more affordable price, Branca said.

Case in point: A dozen investors submitted "double digit" offers this week to purchase 1000 Main, a 837,000-square-foot office building formerly known as Reliant Energy Plaza in downtown Houston.

Of the dozen investment firms, only two were from the U.S., Branca said. CBRE (NYSE: CBG), which is marketing the tower, received bids from investors in Europe, Canada and the Middle East, he said.

Real Estate Alert estimates the building could be worth around $440 million, making it the only Houston office property worth more than $200 million currently for sale. If it closes, 1000 Main will likely the most expensive office deal in Houston real estate history at $526 per square foot.

Houston's real estate market is among the most attractive to foreign investors, nationally and globally, according to the Association of Foreign Investors in Real Estate's (AFIRE) 2013 survey.

Here's where Houston ranks nationally and globally, according to AFIRE:

International Ranking:

  1. London
  2. New York
  3. San Francisco
  4. Houston(No. 5 in 2012)
  5. Los Angeles

U.S. Ranking

  1. New York
  2. San Francisco
  3. Houston(No. 4 in 2012)
  4. Washington, D.C.
  5. Los Angeles

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