Foreign Investors Fuel U.S. CRE Investment

Nearly two-thirds of overseas investors surveyed plan modest or major U.S. real estate investments this year despite moderate concerns about higher interest rates, the Association of Foreign Investors in Real Estate reported.

Another 31 percent of investors surveyed said they expect to maintain or reinvest their investments. No one reported plans to significantly decrease U.S. investment, AFIRE said.

The results confirm “that the tremendous inbound flow of foreign capital remains justified,” said Frank Lively, executive vice president with Wafra Investment Advisory Group, New York. “Foreign capital continues to view the U.S. as the safe haven that it is typified by stable, albeit expensive markets.”

Lively said New York, Los Angeles and San Francisco all ranked among the top five global cities for foreign investment along with the historically stable and consistent Washington, D.C. “[These cities] have and will continue over time to reward cautious and careful institutional investors with the best risk-adjusted returns for their real estate capital,” he said.

New York outranked London as the top global city for foreign real estate investment for the second year, AFIRE reported.

“The investment opportunity is the United States itself,” said AFIRE CEO James Fetgatter. “The real estate fundamentals are sound, the economy continues to remain strong and there are opportunities across all sectors of the real estate spectrum and in both gateway and secondary cities.”

Fetgatter said recent legislation bringing “welcome relief” from certain Foreign Investment in Real Property Tax Act taxes should provide additional incentive for foreign investment into the U.S. “In an environment that is regarded both as the safest and most secure in the world, with a strong currency and the best opportunity for capital appreciation, the U.S. is the safest harbor,” he said.

The survey found that 60 percent of investors said the U.S. provides the most stable and secure real estate investments. Second-place Germany received 19 percent. With 46 percent of the vote, investors named the U.S. the country with the best opportunity for capital appreciation. Second-place Brazil received 17 percent .

Fetgatter said 85 percent of respondents reported no change in their perspective of the viability of U.S. real estate, although 80 percent of respondents said it is now “very difficult” (35 percent) or “somewhat difficult”(45 percent) to find attractive U.S. real estate investment opportunities.

Multifamily and industrial tied for first place as preferred property types. Retail moved from fourth place last year to third, office moved from third to fourth and hotels remained in fifth place.