Study shows New York City is tops for foreign investors

Real Estate Weekly, Jan 10, 2001

For the third year in a row New York City was named the top spot for foreign real estate investment, according to an Association of Foreign Investors in Real Estate survey.

"This year's survey showed an absolutely clear preference for New York City real estate. In fact, at no other time during the eight years in which we have conducted the survey has our members' consensus been this strong," said James Fetgatter, AFIRE's chief executive.

This is the ninth year AFIRE has conducted the survey among association members, which invest nearly $45 billion in U.S. real estate.

New York and San Francisco ranked first and second and garnered the majority of votes. Boston and Washington, D.C. were third and fourth, according to the survey.

"No city named after that was anywhere close in the voting," Fetgatter said.

Gerd Hagenmeyer, president of Deutsche Bank Realty Advisors Inc., said New York has all the ingredients required to be one of the top markets for real estate investments.

"Its sophistication and transparency, highly educated labor pool, high barriers of economic and political entry, as well as its status as the financial capital of the world make New York a unique place to do business," Hagenmeyer said.

For the sixth year in a row, foreign investors named office buildings as their preferred investment. For the fourth time in six years, they have named hotels as the property type in which they are least likely to invest, according to the survey.

Foreign investors' preference for re tail properties dropped precipitously on the list, slipping from second place last year to fourth place in 2000. Multi-family properties rose to the second spot this year, a sharp increase from 1997 when they were ranked last, the survey stated.

"The rankings are consistent with current economic conditions," Fetgatter said. "Many investors fee that retail is vulnerable to the Internet and to a slowing of the economy and consumer spending. The interest in multi-family reflects the United States' high population growth, partly as a result of immigration."

Of the foreign investors responding to the survey, 90 percent said they would either increase or maintain their 2000-level of investments this year. Only 10 percent said they would decrease.

A vast majority of investors responding to the poll said they did not expect the U.S. to have a quarter with negative gross national product until 2004 or later, the poll states.

The one significant change projected by the survey in the coming year was a downturn in German investment. Among factors cited for the decrease is the falling Euro, which is making U.S. and non-European Union real estate more expensive. Also, technology is creating other investment opportunities, which are competing for Deutschemarks in Germany.

"For the last five years the Germans have been the largest foreign acquirers of U.S. real estate," Fetgatter said. "But the overwhelming sentiment among our members is that German investment will decrease in 2001."