More Foreign Capital to Pour into U.S. CRE Sector in 2015

More Foreign Capital to Pour into U.S. CRE Sector in 2015

Continuing a trend that has been a major theme for the U.S. commercial real estate industry in 2014, the vast majority of foreign investors plan to step up their acquisition activity stateside in the year ahead, according to the Association of Foreign Investors in Real Estate’s (AFIRE) annual survey. The survey, completed in the fourth quarter, found that 90 percent of respondents planned to maintain the same level of investment in U.S. properties that they had in 2014, or increase it.

Through the first three quarters of 2014, the most recent period for which data is available, cross-border investment in U.S. commercial real estate totaled approximately $28.2 billion, according to Real Capital Analytics, a New York City-based research firm.

Moving into 2015, foreign investors continue to view the U.S. as outranking other Western countries for stability, while also offering the best opportunities for capital appreciation. This puts United States, in terms of attractiveness, ahead of European economies on the upswing, such as Spain, and emerging economies, including China and Brazil.

In fact, New York City took the top spot this year as the most attractive global market for real estate investment, followed by London and San Francisco. Looking at the United States alone, foreign investors identified New York City, San Francisco, Houston, Los Angeles and Washington, D.C., as the most attractive markets.

The markets that saw the highest volumes of cross-border investment in 2014 included New York City, Boston, Washington, D.C., Los Angeles, San Francisco and Chicago, according to RCA.

Perhaps reflecting some foreign investors’ cautious mindset, multifamily ranked as the most attractive property type for 2015, just as domestic investors begin to question the upside in highly valued multifamily properties. The second-most attractive property type for foreigners is industrial, followed by office, retail and hotels.

Chinese investors are expected to lead the pack in funds pouring into the U.S. in the next few years, with two-thirds of AFIRE survey respondents pointing to China as the biggest source of capital in 2016.

AFIRE members represent 21 countries and manage approximately $2 trillion in real estate assets globally. The investor survey was conducted on behalf of AFIRE by the James A. Graaskamp Center for Real Estate at the Wisconsin School of Business.

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