Survey: 95 Percent of Foreign Investors Plan to Maintain or Boost U.S. Investment in 2017
WASHINGTON, D.C. — The vast majority of foreign investors in U.S. real estate will either maintain or increase their level of investment from 2016 to 2017, according to a newly released survey conducted by the Association of Foreign Investors in Real Estate (AFIRE).
AFIRE is a Washington, D.C.-based organization assisting and representing foreign investors, with over 200 members from 22 countries. According to the organization’s survey, 95 percent of its members will spend the same or more on U.S. real estate in 2017 as they did in 2016.
Members of AFIRE are among the largest international institutional real estate investors in the world and have an estimated $2 trillion in real estate assets under management globally. The survey was conducted in the fourth quarter of 2016 by the James A. Graaskamp Center for Real Estate, Wisconsin School of Business.
For the seventh year in a row, New York City was named the top U.S. investment city by AFIRE’s members, and for the third year in a row was No. 1 globally. The other top five U.S. cities, in order, were Los Angeles, Boston, Seattle and San Francisco.
For the first time since the survey began in 1992, Washington, D.C., fell out of the top five U.S. investment targets, and dropped from eighth to 15th on the global list.
Meanwhile, respondents cited several smaller U.S. cities as having investment potential due to strong job growth and young, affluent populations. These cities included Nashville, Tenn.; Portland, Ore.; Charlotte, N.C.; San Antonio; Madison, Wis.; and Pittsburgh.
Thanks in large part to Brexit — the United Kingdom’s decision to leave the European Union — survey respondents found the U.K. to be less stable for investment, causing the country to slip in the rankings. This turned out to be good news for markets in the United States, which now are more attractive by comparison. More than 50 percent of respondents said that Brexit would have a positive effect on U.S. real estate markets.
Still Not Perfect
The United States is considered the most stable country for real estate investments by a large margin. Approximately 60 percent of respondents ranked the United States first. To put that figure into perspective, only 19 percent of respondents indicated second-place Germany was the most stable.
But that doesn’t mean foreign investors don’t have concerns about America. Investors cited the country’s sustainable growth, strong rule of law, transparency and relative overall security of investments as positives. That said, 33 percent of respondents said they were more pessimistic about the U.S. markets versus last year, compared with 60 percent whose opinion was unchanged and just 8 percent who were more optimistic.
Industrial property edged out multifamily to take first place among preferred property types; hotels remain the least favored property type. While core properties are predominant as an investment strategy, more than half of survey respondents plan to increase both value-added and opportunistic allocations in the coming year.
— Jeff Shaw