Real estate investors have several indicators they take into account when considering whether to acquire a property or not. They read the proverbial tea leaves by examining statistics like unemployment, vacancy rate, new home starts and rent increases as well as other factors like the character of the neighborhood, crime rate and the availability of property.Foreign real estate investing in the USA 

They  look for neighborhoods and markets that are at the beginning stages of a strong recovery or at the tail end of a long decline. But are they ignoring another indicator that can be even more telling? The level of foreign investment in a market.

According to Jones Lang LaSalle’s annual International Capital Sources Report (1), almost $27 billion of capital was invested by foreign investors into the US commercial real estate market in 2012. Almost two-thirds of that $27 billion found its way to nine major markets across the US of which Chicago was one.

This level of foreign investment in US real estate in 2012 is astounding – especially given the levels seen during the height of the recession.

The restrictions placed on foreign investors under the Foreign Investment in Real Property Tax Act of 1980, this level of investment is even more impressive.  Under FIRPTA, foreign investors must pay both their home country and the US taxes from any profits made on the sale of their investment properties. Apparently, foreign investors see so much promise in US real estate that they are willing to pay taxes twice.

So, what does this mean for the average, small-scale real estate investor?

First, the simple fact that foreign investors choose Chicago – among other major cities in the US – to invest hundreds of millions of dollars is proof that the Chicago real estate market has all the signs of being the type of market that investors can reap significant levels of profit. These large investors are not restricted to just investing in their local markets – or even domestic markets. They have the capital and the ability to invest anywhere in the world, and they chose Chicago. That alone says plenty about the viability of investing in Chicago real estate.

But as a small-scale investor, you do not want to compete directly with these large investment groups. So, in what sectors are they investing?

With rents and occupancy rates on the rise, it is no surprise that large, multiunit apartment building top the list. Perhaps more surprising is the fact that warehouse and distribution centers ranked second. In third are office properties. Retail properties are fourth, and hotel and motel properties round out the top five.

Notice that single-family homes and small multiunit properties did not make the list. International investment groups are not interested in single-family homes or small multiunit properties – at least not now. In fact, their investment in what can only be called complementary sectors is great news for the small-scale Chicago real estate investor.

By investing in distribution centers and office space these large investors are betting on and helping Chicago’s economic recovery. This is excellent news for you. By investing in Chicago real estate, you can essentially piggyback on the large international investment companies’ willingness to infuse millions of dollars into the local economy. As the Chicago economy picks up steam, you can expect rents and overall occupancy rates continue to rise.

International investment groups see promise in the Chicago real estate market, and you should take that as a good sign that now is the time to make your own investments.

Source: (1)  Jones Lang LaSalle’s annual International Capital Sources Report