CHICAGO—One of the more remarkable recent developments in US real estate has been the many headline-grabbing buys by foreign investors, especially those from Canada, South Korea and China. But some experts point out that although these investments garner headlines, their importance to the overall economy can be overstated. At last week's NAI Global Market Outlook, for example, Dr. Peter Linneman, chief economist for NAI Global, and Sam Zell, chairman of Equity Group Investments, touched on this during their conversation with Jay Olshonsky, president of NAI Global. GlobeSt.com later sat down with Linneman and Olshonsky to delve into the issue further.

According to Linneman, the first difficulty with judging foreign investment in the US is that “the data on the subject is terrible.” Big investors located in the US can attract funds from Abu Dhabi or other oil-rich countries, for example, and buy US properties, but since the actual legal buyer is American, “it's not counted as foreign investment.”

And it can be difficult to even identify what's foreign money and what's not, Linneman adds. For example, he advises a high net worth German family that years ago invested roughly $1 billion in the US. That original investment has multiplied, but since the money has never been repatriated it's an open question on whether it's now foreign or American money.

Last year, Anbang Insurance Group Co. Ltd. purchased the iconic Waldorf Astoria hotel from Hilton for a record-shattering $1.95 billion and generated all the expected headlines. But Linneman and Olshonsky say there is probably more to the story. They point out that for trophy properties like the Waldorf, there could be a long list of losing bidders who collectively have far more to invest than the one winner, and many if not most will be based in the US. “They're not going to burn all of this money,” says Linneman. “They're going to use it to buy other stuff.”

However, few of those purchases will gain the same notice as Anbang buying one of the nation's best known hotels.

“You're not seeing the many $10 million suburban strip malls that change hands,” Olshonsky says, but you will see a story about a spectacular sale of an iconic retail property to a wealthy Russian investor.

Still, both say overseas money can provide a real boost to the US. “I've never understood the xenophobia that some people have about foreign capital,” Linneman says. “In general, it just adds more liquidity and more depth to the market.”

Both also believe the US will continue to attract foreign money, and not just because investments here can generate high returns. Olshonsky points to the thousands of foreign students who come here to study business, real estate or economics, end up staying for years, and serve as conduits for investments from their home countries. “Everyone still looks at the US and wants to be here,” he says.

“Foreign investment in the US is usually overstated,” Linneman adds, “but it's a real phenomenon.”