July 14, 2021
The pandemic led to shifts in space usage among different property types, prompting speculation last year that U.S. commercial real estate might become less attractive to foreign investors. But the latest survey underwritten by Holland Partner Group for the Association of Foreign Investors in Real Estate, known as AFIRE, shows investors have a high interest in investing in U.S. commercial property in coming years.
About 3 in 4 investors plan to increase their U.S. real estate allocations in the next three to five years, with Europe, the United Kingdom and the Asia-Pacific region also set for further investment. Also, U.S. investment allocation by non-U.S.-based investors is forecast to increase about 71% in the next three to five years, just behind the expected allocation of about 79% for U.S. investors.
The investors surveyed plan to increase their allocation more in multifamily and industrial properties than other commercial real estate types in the next three to five years.
Overall investor optimism is reflected by growing interest in secondary and tertiary U.S. markets, though gateway markets still offer considerable stability. The ranking of Austin, Texas, at the top of that list in 2021 signals a significant shift away from gateway markets. More than 6 in 10 respondents expect to increase their investment in tertiary cities in the next three to five years, rising to 8 in 10 for investment in secondary cities.
As expected amid the pandemic, public health issues top the list of investors’ social and political concerns for U.S. real estate activity in 2021. Even as the vaccine is rolled out in the U.S., vaccine hesitancy alongside pandemic flare-ups in other countries and territories continues to affect travel and trade, and vaccine hesitancy, along with variants, remains a hurdle to getting the pandemic fully under control. Climate change is mentioned as the most urgent issue, with 76% net concern, and it is the highest ranked in terms of extreme concern, at 31%, by nearly 10 percentage points. Sustainability and net zero imperatives, housing affordability and the growth of extremism share the third spot for net concern, at 71%, indicating that environmental, social and political issues are important.