New York Tops List for Foreign Real Estate Investors
According to the Wall Street Journal, last year foreign investors bought $45 billion worth of commercial real estate in the US. This represents 10% of all the capital invested in US commercial real estate, and it looks like that share will continue to grow this year.
Investors from outside the U.S. are attracted to this market, despite some cumbersome tax laws like FIRPTA. They see this market as the most stable in the world, and a safe place to park their assets. The nations with the most investment in U.S. CRE are Canada, China, and Australia. China’s participation in the New York City market has been especially strong, with investments of more than $3 billion there in 2014. China’s share of international investment in U.S. properties is expected to exceed Canada’s by 2016, according to AFIRE’s survey for 2015.
International investors generally favor the “gateway” cities – New York, Washington DC, Los Angeles –but a lot of activity is also being seen in secondary markets such as Denver and Houston, both of which landed top spots in our 2014 CRE Market Comparison Report. Competition has become fierce for desirable properties in the major cities, and investors are looking for additional opportunities elsewhere. According to the Association of Foreign Investors in Real Estate survey linked above, here are the top 5 U.S. cities for international investment in 2015:
1. New York (also top globally)
2. San Francisco
4. Los Angeles
5. Washington DC
After spending last year at the #2 spot globally, New York is back on top as the city with the most international real estate investment. In Manhattan alone last year, foreign investors spent about $12 billion, representing about 30% of all real estate investment there for the year.
Some of New York’s most visible CRE projects have international backing. Investors from Beijing purchased the iconic Waldorf Astoria last fall for $1.95 billion, and Hong Kong investors Jynwel Capital recently purchased the Helmsley Park Lane Hotel, in partnership with the Witkoff Group. Major redevelopment is underway there.
Chinese investors are currently building a $5 billion apartment development in Brooklyn and planning New Jersey’s tallest building, a 95-story condo development in Jersey City. Other areas of Asia and the Middle East are also active in the New York market. Singapore and Kuwaiti investors are funding the construction of towers near the Museum of Modern Art in Manhattan.
The rate of foreign investment is not expected to slow, and foreign partners are increasingly important in financing large projects. The stable economy and potential for return on investments in U.S. commercial properties are a strong incentive to foreign investors with capital to secure. International participation in the marketplace should be taken into account in our marketing strategies, and international connections are more important than ever for moving major CRE deals forward.
All of this reinforces the importance of networking and of using technology to enhance our ability to connect with potential partners, wherever they may be. Increasingly geography is becoming irrelevant, and this opens up massive opportunity for commercial real estate.