Foreign Investors Forecast U.S. Real Estate Recovery in Q2, 2010

Foreign real estate investors say they expect to see a recovery in the U.S. real estate market by the end of the second quarter of 2010, according to a mid-year survey conducted by the Association of Foreign Investors in Real Estate (AFIRE).

Respondents, who responded to the survey conducted by The James A. Graaskamp Center for Real Estate, University of Madison-Wisconsin, projected their investments for the remainder of 2009 will substantially out-strip investments completed year-to-date. On the debt side, survey respondents said they expect to invest three times more than current investment levels year-to-date; equity investors expect they will place seven times more than current year-to-date investments. Overall, three quarters of the survey respondents had not yet invested in 2009; however, more than two-thirds of them plan to invest some debt or equity in U.S. real estate before the end of the year.

In the 17th annual survey, respondents named Washington, D.C., New York, and San Francisco respectively as the top three cities for their investment dollars, and expect these three cities to lead the recovery. However, said James A. Fetgatter, chief executive of AFIRE, “the perception that Washington, D.C. will be the first to recover has risen dramatically since the annual survey,” which was conducted in January. Twice as many respondents named Washington, D.C. as their city of choice over second-place New York. Boston, which has not appeared among investors’ top five cities since 2001, was selected as the fourth city, and Los Angeles was fifth.

Mid-year survey respondents also said that the office sector would recover first, followed by the multi-family and industrial sectors. This is a shift from the annual survey, in which investors expressed a preferred interest for multifamily properties over office buildings for the real estate investment dollars.