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WASHINGTON, DC-A new survey by the locally based Association of Foreign Investors in Real Estate, or AFIRE, finds that foreign based investors will be putting more money in US commercial real estate this year than they did last year–a welcome bit of news in what has been a ghastly investment sales environment over the last six months. For local real estate owners and brokers there is even better news: Washington, DC is the top destination choice of these investors.

Foreign investors say they plan to increase lending by 54% globally and by 58% in the US, according to the 17th annual survey of the association. Also, equity investors plan to increase investment activity by 40% globally and by 73% in the US.

Washington is now the top global city for foreign investors real estate dollars, respondents also say, deposing New York which has traditionally been the top destination. New York came in second position this year, followed by London. Tokyo and Shanghai were in fourth and fifth place choices. Half of the investors’ top ten global cities were located in the US; last year five of the top ten cities were in Asia.

The survey did not provide any specific numbers. “This is more of a survey of investor attitudes,” James A. Fetgatter, chief executive of the association, tells GlobeSt.com.

The typical reaction in the survey was that by mid year the economy and markets will be at a place where overseas investors can start seriously thinking of coming back to the market, he says. While the survey results are heartening, there are a number of qualifiers that have to be factored, say a number of experts contacted by GlobeStcom.

“The problem is, US real estate markets have gone through such a strong dislocation that it is impossible for local investors–much less foreign based ones–to work out what the true pricing or value of assets are right now,” Borja Sierra, executive managing director of Savills US, tells GlobeSt.com. “Information from the past six months is no longer valid.”

Another problem is that, as with most investors these days, foreign investors have much less money to invest and will have to put in much more equity in each deal. The investors that do have money, he continues–namely the sovereign wealth funds–are quite aware that they are one of the few viable players in the market. “Subsequently, they are expecting much greater returns than they have in the past.”

And even the SWFs do not have the same amount of money that they have had in the past, as the price of oil has dropped and in some cases they have had to invest in their own countries, Sierra says. Still, though, he agrees: “there are more foreign investors out there now kicking the tires, looking at deals and asking the right questions.” Whether that translates into actual transactions remains to be seen, he says. One tipping point for this group would be more activity by local investors.

He says, “Once they start buying, I think more foreign investors will follow.” Sierra also says that the US market is no longer a premier destination for many foreign funds and firms. “Now a US deal has to compete with deals from around the world, not just other US deals,” he explains.

Not everyone agrees that the US is now on par with, say, China or Russia. “The United States real estate market is one that has proven to be resilient through many cycles,” Matt Bear, principal with the Venture Development Group in Las Vegas, tells GlobeSt.com. “While we led the world real estate market into this ‘mess’ we will lead it out of it as well.” Foreign investment will play a part in the recovery because those investors are looking for long-term appreciation and a hedge against currency volatility, he predicts.

Nor does everyone agree that Washington is the top destination spot.”We are seeing quite a bit of activity coming out of Europe–especially from German investors–over the last month,” Edward Mermelstein, real estate attorney and founder of Edward A. Mermelstein & Associates, in New York tells GlobeSt.com. They are interested in high-end markets such as New York–especially New York–which have fallen enough to provide good opportunity, he says.

A lot of moving parts have to fall into place before foreign investors spend significant amounts of money in the US–but that is likelier to occur than not, Patrick Dussol, transactional real estate partner at NYC-based law firm Herrick, Feinstein, tells GlobeSt.com.

Dussol believes that the Obama Administration will try to maintain a weakened dollar specifically to spur foreign investment in the United States, and exchange rates favorable to foreigners will have that effect, he says. “Of course, it’s all contingent on lenders opening the windows a bit and financing projects, but I think that market forces will take care of that.”

Dussol acknowledges that if the dollar continues to get stronger relative to foreign currencies, overseas investors would be less likely to invest here. And if lenders continue to hoard money, that too will put a brake on investment in US commercial real estate.

“I’m not saying that we’ve arrived at the end of the doldrums, but I sense that opportunistic investors are eager to put their money in high-quality property in first-tier markets,” Dussol says. “And if the exchange rates and the lenders cooperate, I think we’ll see an overall increase in foreign investment in many real estate asset classes here.European, Middle Eastern and Asian money will be at the forefront, but I believe that foreign money in general will view US real estate assets the way I view them, as a relatively safe haven for global investors.”

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