National Real Estate Investor / January 11th, 2017
National Real Estate Investor reports: The U.S. remains the country viewed by foreign buyers as the “most stable and secure” for real estate investment, according to 2017 survey results from the Association of Foreign Investors in Real Estate (AFIRE). The U.S. is followed by Germany and Canada, the latter of which climbed by one spot from last year to overtake the United Kingdom.
Although 95 percent of survey respondents say they will maintain or increase their existing level of investment in the U.S. this year, the percentage of respondents who said they viewed the U.S. market negatively increased more than three-fold year-over-year—to 33 percent from just 8 percent in 2016.
Rising interest rates and the subsequent decline in yields is AFIRE members’ biggest fear, says AFIRE CEO James Fettgatter of the pessimism.
Investors, developers and lenders feel the commercial real estate sector is “heading into uncharted waters” regarding how markets will respond when faced with a possible 25 to 75 basis points increase in interest rates over the next 18 months, according to Michael Cisternino, director of investment sales at real estate brokerage Transwestern.
“Is there a correction or right-sizing that will occur?” he asks, noting the increase in rates would most impact the office, retail and multifamily sectors as they reach the peak of their performance this cycle.
“It’s not so much of pessimism in the sense of there being no more opportunities, but that institutional investors will have to be more careful in their underwriting. Part of the issue is interest rates had been falling when you look at the numbers historically, so if you overpaid you had cap rate compression in the deal to paper your mistakes. Now you won’t have so much of a cushion,” says Jim Costello, senior vice president of real estate data firm Real Capital Analytics (RCA).
View the full article on National Real Estate Investor: Industrial Overtakes Multifamily as Foreign Investors’ Most Preferred Asset Type