Global property investors still favour US commercial real estate by a wide margin, but second- place China is rapidly closing in, according to an annual report tracking institutional investor interest.
New York and Washington headed the list of preferred cities for commercial real estate investors, the first time two US cities were on top in 16 years of the survey, sponsored by the Association of Foreign Investors in Real Estate (AFIRE).
Respondents said they found investing in US commercial real estate easier than it has been in years, as the credit crisis has driven out investors who relied heavily on cheap debt to finance purchases.
Most respondents were institutional real estate investors who tend to rely less on borrowing.
London tied Washington in second among most attractive cities for commercial real estate. Paris was next, and Shanghai zoomed up from the ninth spot to fill out the top five cities in the survey, which was released yesterday.
Five of the respondents' top 10 global cities are in Asia.
'One of the significant findings that cannot be overlooked is the jump in investors' confidence in China,' AFIRE chief executive James Fetgatter said in an interview.
More respondents said the United States offered the best opportunity for capital appreciation, ahead of China. But the US lead over China as favourite among respondents narrowed to less than five percentage points in 2007 from 27 points in 2005.
India fell to third from second place and Russia moved from fifth to fourth - tied with Mexico, which had been seventh.
About 200 members were surveyed for the report by the association, whose members hold US$700 billion of cross-border real estate, including US$230 billion in the United States.
Within the US property market, the most dramatic change was a reversal of investors' preference for retail property over office space.
Despite the credit problems, Australia's Centro Properties Group is battling to secure new debt for its US shopping centre holdings, retail property moved from fifth out of five categories to the No 1 spot. In contrast, office fell from its long-time top spot to the bottom.
Hotel property was the second-most-preferred US property type, up from third. Industrial property came third, up from fourth, and apartments came in fourth, down from second.
After New York and Washington, the most popular US cities for commercial property investment were Los Angeles, San Francisco and Seattle. Las Vegas saw a marked improvement as an investment location, moving to No 8 from 16th.
Conducted in the final quarter of 2007, the survey reflects the credit crunch that was underway. Stingier lenders and pricier loans drove out private investors who dominated US commercial real estate acquisitions in the past few years. - Reuters
Source : Business Times - 29 Jan 2008
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