According to Savills, a recent surge in investors in the US commercial real estate market will drive interest from new entrants as well as historic players.

The international real estate advisor reports that in the first three months of 2010, opportunities in the US commercial real estate (CRE) market have attracted bids from influential investors. This wave of interest has improved sentiment and could lead to a surge of activity through the balance of 2010, the firm says. Furthermore it states that proposed legislation Real Estate Revitalization Act of 2010 (RERA) could change how foreign investors are taxed. The Bill, which is currently under review in Washington, D.C, could make the US market more attractive to foreign investors.

“We are beginning to see generational opportunities emerge in the US commercial real estate market,” said Borja Sierra, executive managing director of New York City-based Savills US.

“With competition for core properties on the increase, we fully expect that 2010 will be remembered as the start of the US CRE recovery - how else can you explain this ‘who’s who’ roster of investors that are back in the market looking to buy both assets and portfolios on US soil? And if new legislation is passed to lighten the tax burden on foreign investors buying into the US CRE market, this should also drive increased demand.”

Household names from the public and private sides of the CRE business are competing for deals. Most notably, Simon Property Group (nyse: SPG), Vornado (nyse: VNO) and Brookfield Asset Management (among others) are engaged in a highly-publicized contest for control of the massive General Growth Properties mall portfolio. In addition Sam Zell, the iconoclastic real estate investor who sold Equity Office Properties for $39 billion at the peak of the market, is once again a buyer: In February, Zell’s Equity Residential (nyse: EQR) spent $85 million to buy a 220-unit apartment property in Virginia as well as two Manhattan multifamily properties from embattled New York developer Harry Macklowe. Just last week, private equity firm Angelo, Gordon & Co. and NYC developer Extell Development teamed up to buy a Manhattan hotel from the estate of Leona Helmsley for roughly $170 million.

In January, the Real Estate Revitalization Act of 2010 (RERA) was presented to the U.S. Congress. The bill would change how foreign investors seeking opportunities in the U.S. CRE sector are taxed. In 1980, the Foreign Investment Real Estate Property Tax (FIRPTA) mandated that foreign investors pay as much as a 55% levy on any capital gains realized from the sale of U.S. CRE or shares in REITs and REOCs. Supporters of the RERA note that foreign investors can buy other U.S. assets such as Treasuries, corporate bonds and equities without getting hit by such a heavy tax burden. Repealing FIRPTA would potentially make U.S. CRE far more enticing to offshore investors.

“We are actively meeting with a wide range of investors from both the US and abroad,” adds Sierra. “While their return expectations may differ, all of them share one objective: To buy and hold core commercial properties in the US. With the US CRE market firming up fast, confidence is rapidly returning to the market and we expect it to translate into deals under contract relatively fast.”

For further information, please contact:

Borja Sierra, Savills New York
Tel: +1 (1) 646 483 6238

Victoria Cambridge, Savills press office
Tel: +44 (0) 20 7409 8940