Global property investors see surge in spending

Mon Jan 12, 2009 12:03am EST
NEW YORK (Reuters) - 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.
Both foreign lenders and equity investors plan to increase investment globally and in the United States, their favored international investment target, report members of the Association of Foreign Investors in Real Estate (AFIRE).
Lenders expect to boost investment by 54 percent globally and by 58 percent in the United States, while equity investors see increases of 40 percent globally and 73 percent in the United States.
The United States has more appeal this year, even after the economic tumult of 2008, and despite the painful impact of the global credit crunch on commercial real estate, said Jim Fetgatter, AFIRE's chief executive.
U.S. commercial property sales are down 73 percent to $139.43 billion in 2008 compared with 2007, according to research firm Real Capital Analytics. The shares of U.S. real estate investment trusts, or REITs, are off about 62 percent from their highs in February 2007, as measured by the benchmark MSCI US REIT Index .RMZ.
But investors' appetite for U.S. 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, 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 percent deeming it tops in that category.
Germany and Switzerland, each with 11.3 percent of the vote, tied for second place while Australia and Canada tied for third place with 4.8 percent.
In another way, the tough economic conditions are in themselves a draw for investors betting assets might come onto the U.S. market that were not available during the boom years, Fetgatter pointed out.
Washington, D.C. topped the list of preferred cities, followed by London, New York, Tokyo and Shanghai.
In the U.S. market, AFIRE's members replaced last year's favorite 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 U.S. citizens, caused AFIRE's members to favor multifamily over office this year on the theory more people will be renting.
Some 37 percent of AFIRE's members voted the United States the best country for capital appreciation, with Brazil in second place with 16 percent. 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, D.C.-based AFIRE's 200 members responded to the organization's seventeenth annual survey. AFIRE members are from 21 countries and hold about $1 trillion of real estate, including $371 billion in the United States.
(Reporting by Helen Chernikoff; Editing by Andre Grenon)