Despite a lack of placement opportunities in 2009, foreign investors in real estate say they remain committed to the United States as their preferred real estate investment opportunity.[IMAGE]
This sentiment is underscored by a dramatic increase in the number of overseas market participants identifying the United States as offering the best potential for real estate capital appreciation, according to the Association of Foreign Investors in Real Estate (AFIRE).
AFIRE released its 18th annual survey of its nearly 200 members this week. Survey respondents own more than $842 billion of real estate globally including $304 billion in the United States.
In this year's survey, 51 percent of respondents identify the United States as providing the best opportunity for capital appreciation. This compares to 37 percent in 2008, 26 percent in 2007, and 23 percent in 2006. According to AFIRE, the last time respondents' perceptions for U.S. real estate were this strong was in 2003.
The U.K. emerges as the second-best country for capital appreciation, receiving 30 percent of respondents' votes. In third place was China, with 10 percent.
""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, a senior real estate portfolio manager with[COLUMN_BREAK]
the Dutch pension fund PGGM, and AFIRE's newly elected chairman. ""However, new money is becoming available and the AFIRE survey points to an increased focus and interest in a few select markets for 2010.""
According to the survey results, two thirds of respondents plan to increase their investment in the United States in 2010. Investors say they plan to increase U.S. allocations above 2009 levels by 62 percent for equity and 83 percent for debt. At least half the survey respondents report a stronger appetite for both debt and equity investments in the United States than in other countries. As a portion of global real estate, U.S. 2010 allocations for debt represent 80 percent of the global pool, while allocations for equity represent 49 percent.
Among U.S. cities representing the best investment opportunities, survey respondents firmly select Washington, D.C. and New York, receiving much stronger scores than third-place San Francisco. This year, Boston makes a significant climb into fourth place, and Los Angeles falls one spot into fifth place.
As they did last year, survey respondents also express a firm interest in multi-family as their preferred property type followed by office, industrial, retail and hotel properties.
""This is the second year in a row in which multi-family topped investors' product preference,"" said James A. Fetgatter, chief executive of AFIRE. ""More notably, the gap between the top preference and the least-favored product, hotels, has not been this wide since 2000.""
The United States remains the country selected as the ""most stable and secure real estate investment environment,"" but survey respondents have pushed their projections for the recovery of the U.S. commercial real estate market back by six months.
In the June 2009 mid-year survey, half the respondents said they expected recovery by the second quarter of 2010. In the 2010 annual survey, half the respondents say they expect the recovery by the fourth quarter of this year.