International real estate investors flocking to US apartment sector

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According to new research, international buyers are planning to invest far more heavily into the US apartment property marketplace over the course of this year.

The 24th annual survey of members of the Association of Foreign Investors in Real Estate (AFIRE) – which was conducted by the James A. Graaskamp Center for Real Estate, Wisconsin School of Business – found that the US was gearing up for another major uptick in terms of investment into apartment-based real estate.

James A. Fetgatter, chief executive of AFIRE, said: “The investment opportunity is the United States, itself. The real estate fundamentals are sound; the economy continues to remain strong; there are opportunities across all sectors of the real estate spectrum and in both gateway and secondary cities.

“The recent legislation bringing welcome relief from certain FIRPTA taxes should provide additional
incentives for foreign investment into the US. In an environment that is regarded both as the safest and
most secure in the world, with a strong currency and the best opportunity for capital appreciation, the
US is the safest harbor,” added Mr Fetgatter.

International buyers already made 2015 a bumper year in terms of US property investment and siphoned a large part of this money into apartments in the country. Indeed, the vast majority – 64 per cent – of AFIRE’s members predicted a modest or major rise in their US real estate investment interests over the course of 2016. A further 31 per cent of AFIRE members reported that they expected to keep their current investment levels the same. In short, “no one plans a major decrease,” according to AFIRE.

Members of the body are among the largest institutional real estate investors in the world, holding around $2 trillion or more in property assets under management. Industrial and multifamily properties were preferred by the members, with retail, offices and hotels also on their radar.

The volume of investment in the US apartment sphere by foreign investors rose by a huge 180 per cent over the course of 2015, according to related research from New York City-based research firm Real Capital Analytics (RCA). Indeed, foreign buyers were so active last year that they contributed to bringing in a total of $150 billion in apartment properties in 2015, representing a rise of almost a third from 2014, RCA reported.

The largest investors in US apartment real estate were Canadian investors, who spent more than US$10 million on the asset classes, far more than any other country’s investors. The major sale was the $5.3 billion sale of New York City’s Stuyvesant Town to a partnership including Montreal-based Ivanhoe Cambridge. This one sale alone accounted for more than 50 per cent of the total spent by Canadian investors on US property.
According to Jim Costello, senior vice president for RCA, all sales are important in giving an overall true picture of the investment marketplace, not just the large-scale ones. “It takes more than one big deal. It is a lot of small transactions.”

The massive Canadian investment and investors from other countries were also extremely active in 2015. According to RCA research, the total volume of investment from other foreign countries in US-based apartment properties rose by an astonishing 81 per cent in 2015 when compared to the year prior. Investors hailing from the Middle East carried out US apartment purchases totalling $1.6 billion, with those from Qatar and Bahrain leading the way with a vast number of property portfolio deals, RCA confirmed. Investors from the UK accounted for under $2 billion, the research confirmed.

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