For the 13th year, a group of real estate students from the James A. Graaskamp Center for Real Estate conducted and compiled the 27th annual investment survey for the Association of Foreign Investors in Real Estate (AFIRE). In 2005, the Graaskamp Center fostered a strong relationship with AFIRE and this relationship continues today and has been advantageous from several perspectives. Faculty Advisor Joe Walsh says, “Our over 20+ year relationship with AFIRE, the leading organization for foreign investors in US real estate, provides students access to industry leaders who share their expert knowledge and experience. This interaction provides students and our program with amazing industry contacts which, in some cases, have provided exciting career opportunities.”
Wisconsin Real Estate students who conducted and compiled the results include Jared Schnoll, Patrick Kapla, Lexi Magnes, Evan Zimmermann and Blake Richter.
Graphics and highlights from the AFIRE 2020 International Investor Survey can be downloaded here: https://www.afire.org/afire-2020-investor-survey
Highlights from the report include:
Overall US Market Outlook
- Continued low interest rates, stable credit environment, balanced inflation, and employment serve as the basis for a positive US market outlook among 70% of investors. Other reasons for optimism in 2020 include the continued economic growth, return opportunities, and liquidity of the US market relative to other markets.
Institutional Investment Risks and Opportunities
- A large majority (83%) of investors claimed in last year’s report that climate issues would affect their portfolio strategies. This year, two out of three respondents are giving even greater risk consideration to climate change issues, such as sea level rise. Additionally, nearly half of investors included geopolitical issues among their primary concerns for cross-border investing in 2020.
Global Cities: Stability, Exposure, Capital Appreciation
- Los Angeles, Paris and Boston are the top three global cities where investors would like to increase their investment exposure (the three ranked at #7, #6, and #2 in 2019, respectively). London retains its top ranking for the second year in a row as the best global city for capital appreciation, despite Brexit concerns. New York also retains its top rank as the most stable and secure global city, though it also tops the list of cities where investors would like to decrease exposure, followed by Hong Kong and Chicago.
- Nearly nine out of ten investors include ESG criteria for investment decisions, and 90% of investors receive the same or higher returns when accounting for ESG criteria, while only 10% believe that they had lower returns. Affirmed ESG criteria for investors include LEED, GRESB, the UN Global Compact, Building Better Partnership, and Thrive.
- Investors view rent control as counterproductive for addressing housing affordability; 72% say it constrains supply, and 62% say it skews new development toward high-income housing. Two-thirds of investors agree that recent increases in cap rates in rent control markets are due to investors’ perceptions of increased risk in the current political climate.
Property Types and Capital Intentions
- More than 80% of investors seek to increase exposure in multifamily, and 79% seek to increase in industrial, while retail is the least favored property type with 53% of investors seeking to decrease. More broadly, 50% of non-US capital sources report intentions for a net inflow of capital to US real estate in 2020. Only 18% plan net outflows from US real estate, scattered among all non-US capital sources.
News about the AFIRE survey results is typically picked up by major media outlets, including Marketplace, Bloomberg, the International Business Times, and Morningstar.
AFIRE members have a common interest in preserving and promoting investment in cross-border real estate. Founded in 1988, AFIRE currently has more than 200 members representing 22 countries. AFIRE is located at 1300 Pennsylvania Avenue, NW, Washington, DC 20004, 202.312.1400. www.afire.org