NEW YORK--(BUSINESS WIRE)--A majority of commercial real estate (CRE) professionals (55%) expect foreign investment in New York City (NYC) real estate to increase in the next 12 months, according to Marks Paneth’s most recent Gotham Commercial Real Estate Monitor.
Purchases of US real estate by foreign investors has skyrocketed in the past ten years, from $5 billion in 2009 to $87 billion in 2015, according to data from Real Capital Analytics. NYC is the leading global destination for foreign investors and their capital. Their purchases of Manhattan real estate totaled $24 billion last year alone; of that figure, Chinese buyers spent almost $9 billion.1
“New York City commercial real estate is attractive to foreign buyers looking for a secure safe haven to invest in,” said William Jennings, partner-in-charge of Marks Paneth’s Real Estate Group. “Prices are still appreciating and it’s a bargain compared to Hong Kong or London. In addition, the city’s economy is strong, the quality of life is good and conditions are much more stable than in other parts of the world.”
Three quarters of those surveyed said that foreign investors significantly affect the market across all asset classes. Executives said that the biggest impact was in the residential market (57%), followed by hotels (47%), office buildings (37%) and retail (30%).
Economic conditions in the investors’ home countries are an important driver of foreign investment, and some investors are drawn to the NYC market for security and other reasons aside from profit. In the residential market, for example, the EB-5 Program, which grants green cards in exchange for investments made in the US, has been particularly attractive to Chinese buyers, according to Jennings.
China’s slowing economy, the European refugee crisis, fiscal problems in the EU (e.g. Greece) and tumbling commodity prices underpin foreign investment in NYC.
Other foreign buyers, especially those from oil-producing countries whose revenues are slumping along with commodity prices, are likely to develop a taste for income-producing properties, rather than luxury condos for the foreseeable future, according to Real Capital Analytics.
“Recent changes in the tax law that reduce the tax burden for foreign pension funds buying US real estate are likely to attract more investment,” said Mr. Jennings.
These deals can be significant. For example, the Chinese insurance company Anbang bought $6.5 billion worth of property from Blackstone Group last year, and was recently in negotiations to buy Starwood Hotels and Resorts for $14 billion from Marriot International.
Methodology
The survey was completed by 145 professionals working in New York City commercial real estate, including legal counsel, bankers and lenders, brokers and agents, developers, property managers and owners. The results reported here are based on completed self-administered surveys, fielded in late February and early March, 2016.
For more information, please contact John McKenna of ICR, Inc. at (203) 682-8252 or john.mckenna@icrinc.com. The full survey results can be found here.
Footnotes
About Marks Paneth
Marks Paneth LLP is an accounting firm with more than 600 people, including over 80 partners and principals. The firm provides public and private businesses with a full range of auditing, accounting, tax, consulting, trade remediation and valuation services as well as litigation and financial advisory services to domestic and international clients. The firm also specializes in providing tax advisory and consulting for high-net-worth individuals and their families, as well as a wide range of services for international, real estate, hospitality, media, entertainment, nonprofit and government services clients. The firm has a strong track record supporting emerging growth companies, entrepreneurs, business owners and investors as they navigate the business life cycle. The firm's subsidiary, Tailored Technologies, LLC, provides information technology consulting services.
In addition, Marks Paneth’s membership in Morison KSi Ltd., a leading international association for independent business advisers, financial consulting and accounting firms, facilitates service delivery to clients throughout the United States and around the world. Marks Paneth, whose origins date back to 1907, is the 34th largest accounting firm in the nation and the 8th largest in the mid-Atlantic region. In addition, readers of the New York Law Journal rank Marks Paneth as one of the area's top three forensic accounting firms for the sixth year in a row.
Marks Paneth is headquartered in New York City, with additional offices in Washington, DC, New Jersey, Long Island and Westchester. For more information, please visit markspaneth.com.
