U.S. real estate rebound? MIPIM 2011

Reporting from MIPIM 2011 Day 2:

In a recent survey of foreign property investors, the U.S. ranked some 50 percentage points higher than its closest competition in providing the greatest opportunities for capital appreciation and 20 points higher offering the most stable and secure property investments in the world.

The robust property markets in New York and Washington are considered signs of recovery of the real estate market. However, data from CRE showed that the vacancy rates for office, retail and multi-family are still at historic highs. Multi-family rents have started to improve while rents for most other commercial properties still soft. There was a nice spike in the real estate transaction at the end of year 2010, but the market is still weak in terms of price and volume. Property prices in New York and Washington were driven up by risk-averse capital investment in trophy properties, and the prices for most other properties are unchanged. Distressed assets continued to be drag for the market. The retail sector offers some opportunities with more bankruptcies and consolidations still to go. Unemployment and political factors represent macro risks for the real estate market.

Secondary markets in the U.S. are considered the next targets with huge potential and opportunities.


This is a topic of particular relevance to the Graaskamp Center and Prof. François Ortalo-Magné who leads an annual survey of the members of AFIRE, the Association of Foreign Investors in Real Estate. The survey, results of which were released in January, revealed that the U.S. real estate market offers a stronger investment opportunity for foreign real estate investors’ money than it has in the last 10 years. Interestingly, there is typically a fairly even distribution of votes among the top U.S. cities for foreign investment. However, in this year’s survey, New York and Washington scored almost four times higher than third place Boston. Click here to read the full story and the detailed survey results.

AFIRE warms New York with a stronger U.S. investment outlook

Part of our blog series: Meet Our Current Students, a report from a first-year real estate MBA who attended the meeting with Professor François Ortalo-Magné.

The Association of Foreign Investors in Real Estate (AFIRE) held their 2011 Winter Conference at the Mandarin Hotel in New York City on February 9th and 10th. The purpose of the conference was to discuss the results of a survey completed by AFIRE members in October 2010, as well as the current state of the international and U.S. real estate markets.

The conference began with a synopsis of the survey results presented by Professor François Ortalo-Magné, chairman of the Department of Real Estate and Urban Land Economics at the Wisconsin School of Business. In the preceding months, I and another first year MBA Real Estate student Chad Broderick assisted Professor Ortalo-Magné with compiling the survey data and creating his presentation and, in return, we had the opportunity to attend the conference. (See also "U.S. Cities Lead Way for Global Foreign Real Estate Investment," Wisconsin Real Estate Viewpoint, 1/5/11. The Graaskamp Center also conducted the survey in 2010.)

The AFIRE conference was attended by approximately 250 people, a majority of whom hold C-level executive positions at commercial real estate companies located throughout North America, Europe, and Asia. A number of attendees were Wisconsin Real Estate alumni who are now working in cities throughout the U.S. and abroad. From a student’s perspective, it was a great opportunity to hear insight in the commercial real estate industry from the players themselves, whether through panel discussions or personal conversations. At first, we were concerned that, as students, it might be difficult to engage these individuals in conversation. However, what we found was the contrary. While it does help to make an effort and be outgoing, several individuals sought us out because they wanted to welcome us, were alumni of the Wisconsin real estate program, or were interested in recruiting Wisconsin students in the future. And the individuals whom we approached were more than happy to answer our questions and tell us more about their company and its focus within the industry.

The night before the AFIRE conference began, the Wisconsin Real Estate Alumni Association’s northeast chapter held a Real Estate Roundtable at the New York Athletic Club with guest speaker Roy March, CEO of real estate investment banking firm Eastdil Secured. After Mr. March’s presentation concerning capital markets in real estate, the 20+ alumni members in attendance were able to network, giving us students a great opportunity to not only learn more about the industry from professionals but use their resources in hopes of landing a summer internship. Because of the strong Wisconsin alumni network, several promising possibilities came out of that night’s event.

It is opportunities like these that I think make a graduate level real estate education at the Wisconsin School of Business so valuable. While the program’s real estate-focused curriculum and excellent, renowned professors are second to none, it is the alumni network, the reach of the department into industry groups like AFIRE and others, and the James A. Graaskamp name that separates the school from its competitors and gives its students an advantage by offering the ability to both learn more about the industry and advance their prospects for post-graduate careers.

Eric Dowling is a first-year MBA student in the James A. Graaskamp Center for Real Estate. Eric plans to combine his previous real estate experience with his MBA education to establish a career in private equity investments.

Photo by Thomas Arhelger via stock.xchng

CNBC: Foreign Investors Betting Big on US Real Estate

James A. Fetgatter, chief executive of AFIRE, the Association of Foreign Investors in Real Estate, appeared on CNBC to discuss the results of the annual survey of its members by the James A. Graaskamp Center for Real Estate. The survey was conducted in the fourth quarter of 2010 by Professor François Ortalo-Magné with assistance from first-year real estate MBA students at the Wisconsin School of Business.

The survey was also mentioned on the The Today Show last week.

U.S. Cities Lead Way for Global Foreign Real Estate Investment

Results of the 19th annual survey of members of the Association of Foreign Investors in Real Estate (AFIRE) conducted by the James A. Graaskamp Center for Real Estate were published this week.

The survey has revealed that the U.S. real estate market offers a stronger investment opportunity for foreign real estate investors’ money than it has in the last 10 years. Survey respondents hold more than $627 billion of real estate globally, including $265 billion in the U.S. The survey was conducted in the fourth quarter of 2010 by the Graaskamp Center led by Professor François Ortalo-Magné with assistance from first-year real estate MBA students at the Wisconsin School of Business.

"Global investors express strong confidence in their favorite US markets: New York City and Washington, D.C.," said Ortalo-Magné. "The trend we have observed of a broadening interest in emerging market strategies beyond China is in line with what our Global Real Estate Master students heard at MIPIM Asia two months ago."

Among the survey results (click here to visit AFIRE):
• More than 60% of respondents, a margin of 54 percentage points over second-ranked China, indicate that the U.S. offers the best potential for capital appreciation. This is the highest positive response to this question since it was first asked in 2000; this number is a dramatic reversal from 2006 when it reached a lowest level of 23%.

• Investors overwhelmingly chose New York and Washington, D.C. as the two top global cities for their real estate investment dollars.

• 72% of respondents say they plan to invest more capital in the U.S. in 2011 than they did in 2010.

• When ranked among countries targeted for real estate investment in 2011, the U.S. score was quadruple that of the second-ranked U.K.

“As the fear of a double-dip recession has faded, investors are becoming more enthusiastic about the prospects for the U.S. economy and are taking aim at real estate investment opportunities in the U.S.,” said James A. Fetgatter, chief executive of AFIRE. “However, their strategy is more akin to a rifle than a shotgun. Except for multi-family housing, they are not scattering their interest throughout the U.S., but rather narrowly targeting it to New York City and Washington, D.C., to an even greater extent than in previous years.”

Other U.S. Real Estate Trends
2011 Perspective: An Improving Market
When asked about their perception of the U.S. real estate market as a conduit for their investment dollars, responses underscore a continuous improvement over the last year:

• 40% said they were more optimistic than they were at the start of 2010
• 55% said they felt about the same
• 4 % said they were more pessimistic.

Top Five U.S. Cities for Foreign Real Estate Investment
Historically, there has been a fairly even distribution of votes among the top U.S. cities. In this year’s survey, however, New York and Washington scored almost four times higher than third place Boston.
1. New York (#2 in 2010)
2. Washington, D.C. (#1 in 2010)
3. Boston (#4 in 2010)
4. San Francisco (#3 in 2010)
5. Los Angeles (#5 in 2020)

Preferred U.S. Property Types for Investment in 2011
Although, as it has for the last several years, multi-family properties remain investors’ first choice, hotels have come out of three year, fourth- and fifth-place doldrums.
1. Multi-Family (#1 in 2010)
2. Retail (#4 in 2010)
3. Hotel (#5 in 2010)
4. Office (#2 in 2010)
5. Industrial (#3 in 2010)

Global Real Estate Trends
“Compared to 2010, there is definitely a broadening of interest among emerging markets,” said Ian Hawksworth, AFIRE’s newly elected chairman. “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. Likewise, in the last downturn, London was the first market to recover, and whilst investment in the UK Capital is still very active, it is not surprising that London has dropped to third place as investors expand their search to higher yielding markets such as U.S. gateway cities that offer attractive risk adjusted returns.”

Emerging Markets for Investment in 2011
Since 2009, when it was first ranked as an emerging market of interest, Brazil has held either the first (2009 and 2011) or second (2010) ranking. The trio of Brazil, China, and India dominate this ranking. Russia, which has been among the top five emerging markets in the last two years drops into tenth place.
1. Brazil (#2, tied with India, in 2010)
2. China (#1 in 2010)
3. India (#2, tied with Brazil in 2010)
4. Vietnam (unranked in 2010)
5. Mexico (#4 in 2010)

Top Global Cities Rank for 2011
London, which held sway as one of investors’ top two cities every year since 2001, has been deposed into third place. Shanghai returns to fifth place after dropping into ninth place in 2009. Tokyo moves out of the top five into fourteenth position.
1. New York (#3 in 2010)
2. Washington, DC (#2 in 2010)
3. London (#1 in 2010)
4. Paris (#4 in 2010)
5. Shanghai (#9 in 2010)

Top Countries Targeted for Real Estate Investment in 2011
Although historically, investment targeted to the U.S. earns a substantial margin over other countries, in this year’s survey it ranked nearly five times higher than second place U.K. In 2010, it ranked less than three times higher.
1. US (#1 in 2010)
2. UK (#2 in 2010)
3. Germany (# 3 tied with France in 2010)
4. China (#5 in 2010)
5. France (#3 tied with Germany in 2010)

Countries Providing the Best Opportunity for Capital Appreciation in 2011
Consistent with other answers to this year’s survey, the U.S. claimed an historically disproportionate number of votes, more than six times than that for second place China.
1. U.S. (#1 in 2010)
2. China (#3 in 2010)
3. U.K. (#2 in 2010)
4. Brazil (#4 in 2010)
5. Australia (unranked in 2010)

Countries Providing the Most Stable and Secure Real Estate Investments in 2011
The U.S. continues to provide the most stable and secure real estate investment, but by a shrinking margin over other countries. None of the leading emerging markets are among the top 10.
1. U.S. (#1 in 2010)
2. Germany (#2 in 2010)
3. Canada (#3 in 2010)
4. UK (#6 tied with Australia in 2010)
5. Australia (#6 tied with the UK in 2010)

AFIRE members have a common interest in preserving and promoting investment in cross-border real estate. Founded in 1988, AFIRE currently has nearly 200 members representing 21 countries. www.afire.org

The world needs passionate, talented and socially responsible people to develop, finance and improve the urban environment. The Wisconsin Real Estate Program challenges these people to reach their potential, building on a 100-year long tradition in research and education. Click here to learn more.

Foreign Investors in Real Estate Again Pick U.S.

Results of the 18th annual survey conducted among the members of the Association of Foreign Investors in Real Estate (AFIRE), show a dramatic increase in the number of respondents identifying the U.S. as the country providing the best opportunity for real estate capital appreciation. This is the third year the survey was conducted by the James A. Graaskamp Center for Real Estate at the Wisconsin School of Business. Professor François Ortalo-Magné will present the survey results at the group's winter conference in New York in February.

The survey was conducted in the fourth quarter of 2009 among the association’s nearly 200 members. Survey respondents own more than $842 billion of real estate globally, including $304 billion in the U.S.

In this year’s survey:

• 51 percent of respondents identify the U.S. as providing the best opportunity for capital appreciation.
• This compares to 37 percent in 2008, 26 percent in 2007, and 23 percent in 2006.
• The last time respondents’ perceptions for U.S. real estate were this strong was in 2003, when the percentage once again reached 51 percent;
• the U.K. emerges as the second-best country for capital appreciation, receiving 30 percent of respondents’ votes. In third place, China receives 10 percent of respondents’ votes.
• two thirds of respondents plan to increase their investment in the U.S. in 2010 compared to 2009.

Among U.S. cities representing the best investment opportunities, survey respondents firmly select Washington, D.C. and New York, receiving much stronger scores than third-place San Francisco. This year, Boston makes a significant climb into fourth place, and Los Angeles falls one spot into fifth place.

For more survey results, read here.