WASHINGTON, DC-Jones Lang LaSalle’s news that foreign investment in the DC area rose 83% year over year in 2013 is worth examining some more. GlobeSt.com caught up with Scott Homa and Bill Prutting Jr. to dig a little deeper behind this trend.
GlobeSt.com: OK, the AFIRE survey that showed DC dropping a few spots in terms of foreign interest at the start of the year. Can we just pretend it never happened?
Homa: Well, I wouldn’t say that. But also, the finding that DC had slipped was not such a great concern for me. We were still in the top tier and, frankly, I think we always will be.
Prutting: Also what counts is those investors that actually speak with their dollars, which is what investors have done this year in the DC area. AFIRE measures investor intent.
GlobeSt.com: Still, an 83 percent year over year jump is significant. There must be something more to this story than investors seeking a safe haven.
Prutting: Well, not really. This is, fundamentally, a story about investors seeking solid, secure core assets. And there is nothing more secure than the US government even with its current issues. Look at the Federal Reserve’s 200,000 SF plus lease at 1801 K St. Can you find a more credit-worthy tenant than the Federal Reserve?
Homa: Also, federal tenants tend to sign longer leases. The average tenant staying place about 30 years.
GlobeSt.com: Is it my imagination or are foreign buyers getting bolder in their acquisitions in terms of pricing?
Prutting: No, their transaction size is definitely getting larger. Look look back 10 years ago when German investors were very active. The average transaction size was $75 million to $80 million. Today the average size is much larger.
GlobeSt.com: How do you think the rest of the year will continue to play out>
Homa: I think it will continue to be a very active year. And for sellers I would advise this: September will be your time. There will be less opportunities available for buyers as the year goes on.