Retail Properties Tops Among Foreign Investors

Retail properties are on foreign investors’ “most-wanted” lists, according to a survey by the Association of Foreign Investors in Real Estate (AFIRE). For 2008, foreign investors identified retail properties as the No. 1 property type for their investment dollars. Hotels ranked second.

“Our survey shows a dramatic shift in interest among property types on the part of foreign investors,” said James A. Fetgatter, chief executive, AFIRE, Washington, D.C. “In the last survey, retail properties ranked fifth and offices first. This year, offices have fallen to the bottom of investors’ interest list and retail has risen to the top.”

On average, survey respondents said that slightly more than 50% of their real estate planned acquisitions in 2008 will be allocated to the United States. While the percentage is roughly the same as in 2007, the actual dollar amount is expected to increase by 16%.

Foreign investors consider real estate in the United States as having the best opportunity for capital appreciation, according to the survey. But China, which ranks second, is closing the gap.

“One of the significant findings that cannot be overlooked is the jump in investors’ confidence in China,” Fetgatter said. “The gap between the United States and China has narrowed from 27 percentage points in 2005 to fewer than five percentage points in 2007.”

The ranking of the top five U.S. cities for foreign investment echoed respondents’ choices in 2007:

The survey was conducted among AFIRE’s nearly 200 members, who collectively hold $700 billion of cross-border real estate, including $240 billion in the United States. The survey was conducted by The James A. Graaskamp Center for Real Estate, University of Wisconsin, at Madison.