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Why is the US a good place for Foreign Investment?

At MIPIM 2013, an expert panel shared insight into opportunities in the US, and what cities and property types are attracting foreign capital and why.
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Speakers

Chris Ludeman – President, Capital Markets CBRE
James Fetgatter – Chief Executive AFIRE
Dr Will McIntosh – Global Head of Research USAA Real Estate Company
Bernard Haddigan – President Haddigan Capital

 

Foreign >>US Investment at a Glance

$25b in total (2012)

  • Canada $9.1b
  • Middle East / Europe $11.3b
  • Middle East dramatically increasing
  • Asia $4.4b
  • South America $.58b

According to James Fetgatter via a survey conducted by his company, 39% of those surveyed were more optimistic on the US economy than they were a year ago and 0% were more pessimistic.

 

Safe Haven

According to Chris Ludeman, the stability of the US political structure is a major factor in the reputation of the US as a safe haven for foreign investors. This reputation is one that is bolstered not only by improvements in the US political structures, generally speaking, but also by instability in other regions of the world creating a positive relativity effect for the US.

However, the reputation of the US political system as a pillar of stability may be at risk given current events. James Fetgatter suggests that there are two major contributions that harm the confidence foreigners have in the US system; the $14t in national debt and the current freeze up in Washington caused by severe bipartisanism between democrats and republicans.

 

Dynamic Environment

The US maintains a highly dynamic economic environment at several levels; social, legal, financial, to name a few. Because of the social principles of the nation, the demographics of the US are always in a steady state of flux. Immigration continues to be an important part of US culture and these immigrant populations create opportunities for developers and investors because of their variety of tastes and needs.

The large number of cities and their ability to have unique legal and political initiatives provides further wrinkles in the opportunity fabric. Because of the multitude of niches foreign investors have a large number of investment products to choose from based on their individual tastes; as Chris Ludeman put forth, this appeals to foreign investors who represent a vast array of demands and priorities.

 

Hunger for Capital

The current US real estate development market is hungry for capital. Banks are lending with far tighter standards than pre-crisis conditions. Because of the tightening in the debt market developers are forced to look to equity, exactly the resource foreign investors are able to provide.

 

In Conclusion

The US market remains a world leader in foreign investment. Despite current political lockups between self-interested political parties, the US political system remains stable. The diversity of US culture creates a breeding ground of opportunity and a wide range of offerings for foreign investors. Mature systems exist to facilitate foreign investment. Today, unique lending tightness provides further incentive for US developers to welcome foreign equity. The US is in strong position and poised for further improvement if political entities can clean up their act and display more effective leadership.

 

Tony Konstant is currently receiving his master of Science in Real Estate at University of San Diego. He is also a guest curator for the MIPIM sustainability and innovation category on behalf of the University of San Diego, Burnham-Moores Centre for Real Estate.

 

Image: V Desjardins / Images & Co

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