To say that commercial real estate in Wisconsin has become increasingly attractive to foreign investors would be an understatement. Big city – and big money – investors from New York, California, Florida,…
Say that commercial real estate in Wisconsin has become increasingly attractive to foreign investors would be a bit of an understatement.
Big-city – and big-money – investors in New York, California, Florida, Colorado, and even Minnesota and Ohio have been lured for years by the high rates of return they can get from industrial, multi-family and commercial properties here in the Dairy State. But in recent years, that interest has seemed to increase.
To better understand the trend, BizTimes did a little digging into the data, and it turns out that out-of-state buyers have indeed invested millions more in the local market in recent years.
Between the start of 2018 and the end of 2021, commercial real estate in Wisconsin saw almost seven times the amount spent by buyers in California, New York, Florida and Colorado, spending an estimated $175.3 million in 2018 and $1.3 billion. in 2021, according to the Catylist and REDIComps data analysis platforms. The biggest increase was between 2020 and 2021, when investments more than doubled from $597.9 million to $1.3 billion.
Last year’s purchases included over $354.8 million in industrial buildings; $550 million in commercial properties, ranging from auto repair shops to big box stores; $202.3 million in office properties, ranging from corporate facilities to medical office buildings; $58.2 million in multi-family buildings; $36 million in hotels; $36.8 million in specialized buildings such as assisted living facilities; and $108.2 million in land sales, including mobile home parks in Fond du Lac and Chippewa counties.
While Wisconsin has long attracted foreign investors, Tom Shepherd, partner at Colliers | Wisconsin, traces the most recent surge in interest to a $400 million portfolio purchase of Wisconsin and Chicago industrial buildings by New York-based investment firm Blackstone in early 2020. The sale included 14 warehouses industries in southeastern Wisconsin.
“(Out-of-state investment) has always been there, but it’s picked up in the last few years,” Shepherd said. “A transaction like the Blackstone Wallet validates your market. … (It makes other investors say) ‘We’ve heard good things about (Wisconsin), let’s go and dive into the fundamentals.’
What continues to make the state so attractive to out-of-state investors — especially investors from places known for high real estate costs like California, New York and Florida — is the yield.
An investor can sell property in California that has a 3% cap rate, Shepherd said, and then use that money to buy property in Wisconsin with a 5% to 6% cap rate.
And while Shepherd doesn’t think the market will continue to see the kind of activity it did in 2021, there’s still plenty of interest from out-of-state buyers looking for “better.” returns”.
“There are still several bidders. We’re tracking bid activity, and it’s maybe 20% to 25% of the market peak, but there are always buyers who are interested,” he said, adding that the company generally counts. four or five buyers interested in many of the properties it puts on the market. .
“The industrial market has never been stronger, despite headwinds. There are still over 9 million square feet of industrial development in the pipeline. … It’s almost like ‘Get in line,’” he said.
Andy Hess, director of Milwaukee-based Founders 3 Real Estate Services, agrees.
“With the investment deals I see today, the tendency is to see multiple offers from out of state, and it’s not unusual to see most, if not all of the interest, come from out-of-state buyers,” Hess said. . “There are many reasons for this, but the real estate market fundamentals are very strong here.”
Those strong real estate fundamentals are also attracting buyers from outside the country, he said, pointing to last year’s $100 million sale of the Leonardo DRS Buildings – a 373,000 square foot manufacturing facility and a 119,000 square foot office building – in Menomonee Chutes to California-based Bascom Group LLC and London-based Capital Trust Group.
And Hess doesn’t see investors losing interest in the state anytime soon.
“There are so many stocks across the country looking for real estate bargains that investor capital ends up coming here,” he said.
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