Among Foreign Investors, U.S. Real Estate Trounces Competition – But Gap between U.S. and Asia Narrows

WASHINGTON, Jan. 28 /PRNewswire/ — Despite a growing interest in Asia, U.S. real estate, by a wide margin, has risen to the top of the global property market among foreign investors, with New York City and Washington named the top two global cities for foreign investors’ real estate dollars according to the results of the 16th annual survey released today by the Association of Foreign Investors in Real Estate (AFIRE). The survey was conducted in the fourth quarter 2007 among the association’s nearly 200 members. Collectively, AFIRE members hold $700 billion of cross-border real estate, including $230 billion in the U.S. The survey was conducted by The James A. Graaskamp Center for Real Estate, University of Wisconsin – Madison.

“The ascension of NY and Washington, DC as the two top global cities (with London tied for second place) represents a very strong showing for U.S. real estate,” said Karin Shewer, principal, Real Estate Capital Partners, and the new chairman of AFIRE. “It is the only time since the global city category was added to our survey that U.S. cities have taken first and second spots.”

“One of the significant findings that cannot be overlooked is the jump in investors’ confidence in China,” added James A. Fetgatter, chief executive, AFIRE. “For the second time in three years, China has been voted as the country offering the second best chance for capital appreciation after the U.S. Even more significant is that the gap between the U.S. and China has narrowed from 27 percentage points in 2005 to fewer than five percentage points in 2007. In addition, five of the respondents’ top ten global cities are in Asia.”
Global Snapshot

Top Five Global Cities for Foreign Investor’s Real Estate Dollars
1. New York; up from #2 in 2006
2. Washington; DC up from #4 in 2006
2. London; down from #1 in 2006
4. Paris; down from #3 in 2006
5. Shanghai; up from #9 in 2006

Other significant changes:
— Singapore, up to 6th place (tied with Tokyo) from 24th place in 2006
— Sydney, up to 9th place from 15th place in 2006
— Hong Kong, up to 10th place from 11th place in 2006

Most Stable and Secure Countries for Real Estate Investments
1. U.S. – 56% of vote
2. Germany – 11% of vote; up from #3, with 4.5% of the vote in 2006
3. United Kingdom – 8.8% of vote; down from #2, with 11% of the vote in
2006
4. Australia – 8.8% of vote; up from #5, with 3% of the vote in 2006
5. Japan – 5.3% of vote; with 3% of the vote [tied with Australia],
unchanged from 2006

Countries Offering the Best Opportunity for Capital Appreciation
1. U.S. – maintains ranking; increases percentage of votes to 26.2% from
23% in 2006.
2. China – moves into 2nd place from 3rd; increases percentage of votes
to 21.4% from 14.8% in 2006.
3. India – falls from 2nd to 3rd; decreases percentage of votes from 18%
to 16.7% in 2006.
4. Russia – moves from 5th to 4th; although percentage of votes decreases
to 7.1% from 8.2% in 2006.
4. Mexico – moves from 7th to 4th (tied with Russia); increases
percentage of votes to 7.1% from 4.9% in 2006.

U.S. Snapshot
Top U.S. Property Types

Within the U.S. property market, the most dramatic change was a total reversal of investors’ preferred U.S. property types, with every property category shifting and, most dramatically, office properties falling into fifth place and retail properties rising to first.
1. Retail – from 5th place in 2006
2. Hotels – from 3rd place in 2006
3. Industrial – from 4th place in 2006
4. Multi-family – from 2nd place in 2006
5. Office – from 1st place in 2006

Top U.S. Cities
The ranking of the top five U.S. cities echoed respondents’ choices in
2006:

1. New York
2. Washington, DC
3. Los Angeles
4. San Francisco
5. Seattle

Climbing up the ladder:
— Las Vegas from 16th place to 8th
Appetite and Opportunity: U.S.

The resilience of the U.S. real estate market among seasoned international investors is underscored by the timing of the survey, conducted during the fourth quarter of 2007, after the much-publicized credit crunch and sub-prime mortgage crisis. In spite of this news:
— On average, survey respondents say that slightly more than 50% of their
real estate planned acquisitions in 2008 will be allocated to the U.S.
While the percentage allocated to the U.S. remains roughly the same as
2007, the actual dollar amount is expected to increase by 16%.
— Eighty-five percent of survey respondents say that recent fluctuations
in the dollar have not prompted them to increase their U.S. allocation.
— The percentage of respondents saying it was “very difficult” to find
attractive U.S. real estate fell to 22.8% from 37.5% in 2006. This
represents the smallest percentage expressing this sentiment since
2003.
— For the first time since 2004, a measurable number of investors
declared investing in the U.S. to be “somewhat easy.”
— For the first time in years “distressed assets” are mentioned by AFIRE
members as a new strategic focus.
Appetite and Opportunity: Global

While U.S. real estate continues to hold sway over real estate in other countries, its dominance is being challenged by other global opportunities.
— On average, survey respondents say they plan to increase global
spending on real estate from $1.394 billion in 2007 to $1.692 billion
in 2008, an increase of more than 20% (compared to a 16% increase in
planned U.S. acquisitions).
AFIRE members have a common interest in preserving and promoting investment in cross-border real estate. Founded in 1988, AFIRE currently has nearly 200 members representing 21 countries. AFIRE is located at 1300 Pennsylvania Avenue, NW, Washington, DC; (202) 312-1400. www.afire.org

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SOURCE Association of Foreign Investors in Real Estate (AFIRE)

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