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New York

NYC foreign investment hits highest level in four years

32% of city buyers are from abroad

Foreign investment in NYC tripled in 2023
JAM Real Estate Partners’ Jared Pinchasick, Peak Capital Advisors’ Alex Rabin and Kenbishi Sake Brewing's Masataka Shirakashi with 355 East 50th Street (JAM Real Estate Partners, Peak Capital Advisors, Kenbishi Sake Brewing, Google Maps, Getty)
By
Dec 19, 2023, 7:00 AM

Foreign investors that sat on the sidelines through the pandemic dove back into the city’s sales market in 2023, notching the highest share of the total buyer pool since 2019.

International buyers accounted for 32.4 percent of the city’s investors this year, a leap above figures for 2021 and 2022 and a hair better than the 32.3 percent recorded in 2020, according to a report by brokerage Avison Young. 

As of mid-December, 2023 dollar volume had tripled year-over-year, helping New York City regain its place as the top city for foreign investment, the report detailed. 

As the rate hikes of 2022 collided with tighter financing markets by early 2023, the city’s domestic investors pulled back, making room for overseas buyers with deep-enough pockets to forgo loans.

“Once financing got more expensive and started to dry up, I think that’s when the foreign investors, being cash buyers, were able to compete,” James Nelson, Avison Young’s head of tri-state investment sales, said. 

Qatar and Japan clocked in as the No. 1 and No. 2 buyers of city real estate, respectively, by dollar volume in 2023. Deals done by Qatar-based firms topped $1 billion, while Japan investors accounted for just shy of $1 billion.

Depreciation benefits and better returns drew Japanese buyers, Avison Young broker Brandon Polakoff said. The yield on the 10-year Japanese government bond failed to crack 1 percent through 2023; the average rate for the U.S. 10-year treasury rate was about 4 percent. 

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Overwhelmingly, foreign buyers flocked to stabilized assets.

“They’re not buying in the challenging part of the market: heavily rent-stabilized or unrenovated buildings,” Polakoff said. “They have very strict criteria.”

The broker pointed to recent transactions as evidence of that demand. In the fourth quarter, Japanese investors closed on three fully occupied, gut-renovated properties for about $35 million.

According to property records, Peak Capital Advisors and JAM Real Estate Partners sold 96 Sterling Place in Park Slope to Japanese investment firm Sow Kousan for about $17 million and 422 East 81st Street on the Upper East Side to Shink for roughly $11 million.

The team also unloaded 355 East 50th Street for $8 million to Kenbishi Sake Brewing, Japan’s first branded sake brewery. 

If the Federal Reserve delivers its three forecast rate cuts next year, it’s possible foreign investors will take a back seat to domestic buyers, as cheaper financing would stoke local demand.

“I don’t think foreign buyers are going to be counted out,” Nelson said. “But they definitely will have more competition from U.S.-based investors next year.”

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Foreign InvestmentForeign InvestorsInterest RatesInvestment Sales