Foreign investment in Greater Boston real estate has skyrocketed to record heights, more than tripling in the past year and bringing new ownership to some of the area's premier addresses.
Foreign buyers spent $4.2 billion in deals for office properties that included buyers from Canada, Norway, Japan, Chile, Switzerland, Ireland, the Netherlands, France, Hong Kong, Japan and Singapore. That was up from $1.3 billion in 2013.
"My prediction is that more than half of the investment sales coming up this year will be foreign investors," said David Begelfer, CEO of NAIOP Massachusetts, a commercial real estate development trade group. "We've been discovered. Some of these larger deals are pension fund money, sovereign funds."
The proportion of foreign investment has nearly doubled in the past year: Foreign investors accounted for about 30 percent of the approximately $14.4 billion in real estate transactions that were $2.5 million or greater last year, excluding homes, according to Real Capital Analytics, a New York commercial real estate data firm. That's up from about 16.5 percent of the $11.02 billion in 2013 transactions.
Almost half the money spent on office buildings in 2014 was by foreign investors, accounting for 46 percent of the $9.17 billion in deals — up from 27 percent in 2013.
Among the biggest were a September trifecta by Oxford Properties Group, the real estate arm of Canada's Ontario Municipal Employees Retirement System. Oxford snatched up three top addresses from Blackstone Group: 60 State St. for $817.49 million and 225 Franklin St. in Boston for $590 million, and Cambridge's 1 Memorial Drive for $405 million, according to Real Capital.
In October, Norges Bank Investment Management, Norway's sovereign wealth fund, paid $715.17 million to Boston Properties for 45 percent of 100 Federal St. and Atlantic Wharf in Boston. In July, Norges and MetLife had bought 1 Beacon St. in Boston for $562 million.
"It's becoming more costly for local buyers to buy property," Begelfer said. "The limited supply of properties to buy and a much larger demand from international players is pushing up the cost."
NAIOP Massachusetts will tackle the issue in a panel discussion tomorrow titled "From the Outside In: How Boston Is Fueled by Foreign Capital."
Boston's booming economy and job creation in biotechnology, technology, health care, research, education and financial services make it attractive to foreign capital, said Riaz Cassum, senior managing director of HFF in Boston, which arranges debt and equity capital for commercial real estate owners, developers and operators.
"It's viewed as a safe dollar-denominated investment," he said. "It has a good diversified economy, low unemployment rate, strong barriers to entry, and Boston's become more accessible just literally in terms of direct flights. ... It's always been attractive to European investors, and now it's expanding to the growing Asian and Middle East capital."
The increasing foreign ownership of properties has broad implications — not all positive, according to Begelfer, who likened the trend to the loss of corporate headquarters in Boston.
"Mayor Menino had … relationships with all the major property owners in Boston and could count on them civically and charitably," Begelfer said. "With this whole new influx of (foreign) buyers, we may not see as much money flowing into civic and charitable initiatives that the new mayor has and that the charities count on. We have some absentee owners who might not be concerned about being the good neighbor."
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