Foreign investors in real estate are committed to the US as their preferred property investment opportunity, it is claimed in a new survey.
The sentiment is underscored by a dramatic increase in the number of respondents identifying the US as best for capital appreciation. Over half, some 51%, said so in the 18th annual survey from the Association of Foreign Investors in Real Estate (AFIRE). This is up from 37% in 2008, 26% in 2007 and 23% in 2006.
The survey of the association’s 200 members that own more than $842 billion of real estate globally including $304 billion in the US, also found that the last time respondents’ perceptions for US real estate were this strong was in 2003 when the percentage was also 51.
The UK is the second best investment prospect for capital appreciation, receiving 30% of votes, with China in third at 10%.
‘Although foreign investors expressed every intent to resume investing in 2009, like everyone else, their plans were sidelined by a paralyzed marketplace with no precedent and limited investment opportunities,’ said Werner Sohier, AFIRE chairman.
‘However, new money is becoming available and the survey points to an increased focus and interest in a few select markets for 2010, especially London and in the US, where prospects appear to be brightening,’ he added.
Investors also said that they plan to increase US allocations above 2009 levels by 62% for equity and 83% for debt and at least half the survey respondents report a stronger appetite for both debt and equity investments in the US than in other countries.
US cities representing the best investment opportunities were named as Washington DC in first place followed by New York, San Francisco, Boston and Los Angeles in fifth place.
As they did last year, survey respondents also expressed a firm interest in multi‐family as their preferred property type followed by office, industrial, retail and hotel properties.
They also pushed their projections for the recovery of the US commercial real estate market back by six months.
Overall optimism about the state of the US real estate market remains strong, with some 33% saying they are more optimistic than they were in June 2009, 63% unchanged and just 6% more pessimistic.
On a global basis three cities emerged as clear targets for investors. London surged into first place with a significant lead over both Washington and New York with Paris and Tokyo placed a distant fourth and fifth.
The US was voted the most stable and secure real estate investment environment, although with a declining lead of 44%, followed by Germany at 21% and Canada 14%. It is the first time that the US has fallen below 50 % in the survey’s history.
‘The financial crisis of the past year has obviously affected investors’ perceptions of US real estate as stable and secure. However, it is also apparent that opportunity lies within this instability since the US, along with the UK, shows substantially higher scoring for expected capital appreciation,’ explained James Fetgatter, AFIRE chief executive.
‘One half of the respondents ranked the US as the number one country for capital appreciation compared to only 25% in 2006. The UK showed even greater movement as in 2006 only 2% of respondents named the UK as the best country for capital appreciation compared to 30% this year,’ he added.
The top five emerging markets were named as China, Brazil, India, Mexico, and Turkey. However green attributes are becoming more influential. Some 14% said green issues significantly influence their decision‐making when considering a property while 70% said green attributes were somewhat of an influence. In the 2009 survey, the numbers were 12% and 60% respectively.