Greek Crisis, U.S. Benefit?

What will the Greek crisis mean for the U.S. economy and commercial real estate?

What will the Greek crisis mean for the U.S. economy and commercial real estate? There’s no way to be absolutely sure, since investors aren’t particularly rational, and have been known to panic even when their own ox isn’t being gored. But arguably there won’t be much short-term impact on these shores, and that the long-term effect might actually benefit the U.S. and its real estate. That seems counterintuitive, but however the thing plays out, it seems that the main losers will be in the eurozone. As investors shy away from there, they will turn to the U.S. and its assets.

First, some data. Greece is a small economy, and only its ties to the eurozone are giving the crisis its outsized resonance. How small is Greece? About the size of Connecticut in terms of GDP. In the days of the drachma, in similar circumstances, a Greek government would have devalued its currency. Specific investors might be hurt by that in the short-term, but presumably most investors in such an economy would understand the risks they’re taking and hedge accordingly. Another thing: the U.S. doesn’t have much direct exposure to Greece, and even those few U.S. investors (again) pretty much know the risks they’re taking. Much of the trade between the countries involves vegetables, and it’s less than 1 percent of all U.S. trade. Yet none of these facts quite rule out panic about the euro FUBARing the world economy, and so the American economy, at least for a while. Call it a wildcard.

On the other hand, a vote by Greeks to quit letting the Germans impose austerity on them (which is entirely likely) might not cause that much worldwide panic. After all, the Greek drama’s been going on for a while now, going back about five years. Had the Greeks upset the euro in 2010, things might have been different, since all of the economies of the world — including the linchpin U.S. economy — were much weaker then. In 2015, the equities markets might bounce around a while because of Grexit, but it doesn’t take much of a shock for that to happen. On Monday, Asian stock markets fell around 3 percent Monday, while European markets were down almost 4 percent, and U.S. markets were down too (the Dow, about 2 percent).

If the impact of a Grexit more than temporary, especially in the eurozone, expect U.S. real estate to benefit from more investors looking to buy here. There’s already momentum in that direction. About $24 billion in foreign capital flowed to U.S. properties during the first quarter of 2015, equaling more than half the total investment during all of 2014, according to Cushman & Wakfield. And there have been some major headline deals, such as the Chinese purchase of the Waldorf-Astoria and the acquisition by GIC Pte, Singapore’s sovereign-wealth fund, of Blackstone’s IndCor Properties Inc. for $8.1 billion. Besides that, there have also been a lot of bread-and-butter deals as less famed investors simply want a place to part their money that generates a better return than Treasuries or the like. Just a little more hubbub in the eurozone, and 2015 could be a record year for foreign investment in American properties.