DC Loses Sheen with Foreign Investors

WASHINGTON, DC-Most—60%, to be exact—of respondents to the annual Association of Foreign Investors in Real Estate survey say they will increase their investments in the US this year. The country is still regarded as a top market for capital market appreciation. However, that number is down from 72% from last year’s survey. This theme—namely, a sense of growing caution about the US market—is reflected throughout the survey, James A. Fetgatter, chief executive officer of AFIRE, tells GlobeSt.com.

“Last year the US was higher in the category of stable and secure markets than this year,” he says. “It was also higher in terms capital appreciation.” The events of 2011, he says, have clearly taken a toll on investors’ confidence.

This story line is doubly so for the Washington, DC-area market, once a highly coveted location for foreign investors. In the 2012 survey, New York, like last year, is the top choice for foreign investors and Washington, DC—again as in 2011—is the second destination choice. However, DC’s appeal has clearly diminished in the eyes of many investors.

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“Washington DC got far fewer votes in this survey than it did in last year’s survey,” Fetgatter says—enough to retain the number two position, but just barely. Indeed, the DC market lost its number two slot in the global rankings to the city of London. The reason for the city’s decline is, not surprisingly, the continuing uncertainty about the government’s plan for spending and the impact that will have on the area. 

For every descending star there is an ascending one, and in this case it would be Brazil and the city of Sao Paulo. It emerged among the global leaders in this year’s survey, with Brazil jumping 14.2 percentage points from fourth place to second best country for capital appreciation. The US remains the top country and China is now third in this category. These three nations received 70% of the vote on this particular question, with the remaining 30% spread across 13 countries. Sao Paulo rose from 26th place last year to investors’ fourth global city for real estate investment dollars.

Respondents to the survey—now in its 20th year—hold more than $874 billion of real estate globally, including $338 billion in the US. The survey was conducted in the fourth quarter of 2011 by the James A. Graaskamp Center for Real Estate at the Wisconsin School of Business.