Property Investors Expected To Spend More This Year: Report

Source : The Business Times, January 13, 2009

US seen as country providing the most stable and secure real estate

(NEW YORK) Foreign investors in real estate expect to spend much more in 2009 than they did in 2008, according to an annual report tracking institutional investor interest.

Displaced: In the US market, Afire's members replaced last year's favourite property type, office, with multifamily residential real estate, such as apartment buildings

Both foreign lenders and equity investors plan to increase investment globally and in the United States, their favoured international investment target, report members of the Association of Foreign Investors in Real Estate (Afire).

Lenders expect to boost investment by 54 per cent globally and by 58 per cent in the United States, while equity investors see increases of 40 per cent globally and 73 per cent in the United States.

The United States has more appeal this year, even after last year's economic tumult, and despite the painful impact of the global credit crunch on commercial real estate, said Jim Fetgatter, Afire's chief executive.

US commercial property sales are down 73 per cent to US$139.43 billion last year compared with 2007, according to research firm Real Capital Analytics. The shares of US real estate investment trusts, or Reits, are off about 62 per cent from their highs in February 2007, as measured by the benchmark MSCI US Reit Index.

But investors' appetite for US real estate has only sharpened in the face of these difficulties because the problems are a global phenomenon. The United States remains the world's largest and to Afire's members the safest real estate market, Mr Fetgatter said.

'If you are going to be an international investor you'll want a significant part of your portfolio in the largest market,' he added.

By a large margin, the survey's respondents consider the United States the country providing the most stable and secure real estate investments, with 53 per cent deeming it tops in that category.

Germany and Switzerland, each with 11.3 per cent of the vote, tied for second place while Australia and Canada tied for third place with 4.8 per cent.

In another way, the tough economic conditions are in themselves a draw for investors betting assets might come onto the US market that were not available during the boom years, Mr Fetgatter pointed out.

Washington, DC topped the list of preferred cities, followed by London, New York, Tokyo and Shanghai.

In the US market, Afire's members replaced last year's favourite property type, office, with multifamily residential real estate, such as apartment buildings. Office fell to second place, followed by industrial, retail and hotel.

The housing slump, which is making the purchase of a home either more difficult or less attractive to US citizens, caused Afire's members to favour multifamily over office this year on the theory more people will be renting.

Some 37 per cent of Afire's members voted the United States the best country for capital appreciation, with Brazil in second place with 16 per cent. Brazil displaced China, which fell into third place. The United Kingdom jumped to fourth place from ninth after asset prices fell there. India fell to fifth place from third.

About half of Washington, DC-based Afire's 200 members responded to the organisation's seventeenth annual survey.

Afire members are from 21 countries and hold about US$1 trillion of real estate, including US$371 billion in the United States. -- Reuters