For many years, foreign buyers invested heavily in South Florida real estate, preferring residential investments over commercial investments. Residential investments are relatively easy to buy and sell, whereas commercial investments are longer term commitments and can be more complicated to sell. Residential purchases can also provide a home and a lifestyle that investors can enjoy if they choose to use the property instead of renting it to a tenant. According to Alex Zylberglait, Vice President at Marcus & MIllichap Real Estate Investment Services, “For decades foreign buyers came to the U.S. to buy condos. But a strong U.S. dollar and skyrocketing condo prices has been shifting foreign investors’ appetite in Miami and South Florida real estate from residential to commercial.”
According to the 2016 Profile of International Home Buying Activity, Florida accounted for 31 percent of the nation’s foreign home sales in 2011 with a majority of those sales in Palm Beach, Broward, and Miami-Dade counties. However, by 2016 those sales had dropped to 22 percent as condo prices spiked. According to Zylberglait, “As the condo prices got out of balance by late 2014 and early 2015, foreign buyers started looking at commercial assets that would give them more predictable cash flows and a higher appreciation potential.” Between 2009 and 2014, commercial sales in Miami and the surrounding area fluctuated from a low of $71 million to a high of $714 million. In 2015, commercial sales ballooned to more than $2 billion.
Even though residential sales have slowed, investors are not leaving South Florida, instead they are shifting their money into commercial assets. The EB-5 Visa Program is a big draw for foreign investors with many developers offering a variety of commercial opportunities. Foreign buyers still believe U.S. real estate is one of the the most stable and secure investments in the world. Real estate is cyclical and the current trend toward commercial purchases will eventually shift back to residential purchases.