US is best market for capital appreciation in 2011

Almost two-thirds of foreign real estate investors have billed the US as the top global market in which to invest, the highest level since 2000 and garnering six times more votes than second-placed China.

Foreign investors will commit even more capital to US real estate markets in 2011 after naming the country the best global opportunity for capital appreciation.

Around 72 percent of investors questioned by the Association of Foreign Investors in Real Estate (AFIRE) said they expected to invest more capital in 2011 compared to 2010, with a further 60 percent of respondents claiming the US offered the best potential for capital appreciation – the highest level since 2000. In 2006, just 23 percent of investors gave the US the same seal of approval.

With 200 members representing $627 billion of global real estate, AFIRE chief executive James Fetgatter said investors were “taking aim at real estate investment opportunities in the US”. In terms of targeted investment destinations for 2011, the US ranked nearly five times higher than the second placed UK, while the US achieved more than six times the number of votes of China when it came to the potential for capital appreciation.

However, Fettgatter said investors’ strategy was “more akin to a rifle than a shotgun” adding that investors were “not scattering their interest throughout the US, but rather narrowly targeting it … to an even greater extent than in previous years.”

The fourth quarter survey, conducted for AFIRE by the Wisconsin School of Business’ James Graaskamp Center for Real Estate, revealed that New York and Washington DC were the top target cities for foreign capital within the US, scoring almost four times more votes than third placed Boston. San Francisco and Los Angeles came in fourth and fifth place, respectively. New York and Washington DC were also voted the top two global cities in which to invest capital, above London, Paris and Shanghai.

Respondents also continued to place multifamily as the favoured real estate sector in the US, with retail coming in second position, followed by hotel, office and industrial.

Ian Hawksworth, AFIRE chairman and chief executive of listed London-based firm Capital & Counties Properties, said there was also a “broadening of interest” among foreign investors in the emerging markets. Brazil overtook China as the best emerging market for investment in 2011, while India continued to hold the third spot. However, Russia dropped out of the top five rankings, with Vietnam and Mexico slipping into fourth and fifth positions.

“For those who were risk averse last year, China seemed a safe harbor for emerging market investments. But, for now at least, investors have become more comfortable diversifying into other emerging markets,” Hawksworth added.