Foreign investment in New York City commercial real estate remained robust in 2018, increasing to $8.3 billion in 2018, which corresponds to the overall uptick in investment sales citywide to $45 billion, according to James Nelson, Principal and Head of Avison Young’s Tri-State Investment Sales group. Foreign transactions rose 8 percent from the previous year.
Nelson said his team’s 2018 Foreign Investment Report shows that Canada led the way in foreign investments in New York City with $3.2 billion or 41 percent of the total dollar volume, Germany was a distant second with $1.2 billion or 16 percent of the total, and the Netherlands recorded $905 million or 12 percent of the total, according to the report, which analyzes data from Real Capital Analytics.
“The center of foreign investment in New York City has shifted from China to Canada and Europe,” Nelson said. “In light of this, Avison Young is well positioned to serve as an advisor to international investors. Our headquarters is located in Canada and we recently acquired GVA, a leading U.K. real estate advisory business, which added offices in over 30 European cities and a broad portfolio of international clients.”
China was noticeably absent in New York City in 2018, accounting for only $160 million of the acquisitions or only 2 percent of the foreign dollar volume, a drop from its peak of $6.2 billion in 2016, the report showed.
Nelson noted, “This is likely due to stricter measures imposed in China in 2017 on overseas investments in property, with Chinese investors expected to continue to sell more foreign real estate than they buy in 2019.”
Of the foreign investment, office transactions accounted for 59 percent of the dollar volume, with multi-family at 31 percent and retail at 23 percent.
“We expect to see more interest in office properties for 2019 as proposed regulations for multi-family will deter foreign investment, even if they have a strong local partner,” Nelson noted. “With the introduction of Opportunity Zones, we should also see increased interest in commercial development in the boroughs.”
Some of the most active foreign buyers in 2018 included Brookfield, GIC, OMERS and Allianz. Brookfield, a Canadian-owned company, purchased an option for a 99-year ground lease for $1.2 billion on Kushner Cos.’ office tower at 666 Fifth Avenue. The company also spent $165 million on four acres in the South Bronx, where it plans to build 1,300 housing units, and bought seven storefronts on Bleecker Street to test out new retail concepts. With its December 2018 acquisition of Forest City Realty Trust for $11.4 billion, Brookfield became New York City’s biggest commercial landlord.
Tri-State Investment Sales Group
Nelson said that Avison Young’s Tri-State Investment Sales group is well-suited to offer foreign investors the best inventory in New York City.
In the last 12 months, the Tri-State Investment Sales group has closed or put into contract properties valued at over $750 million. The group is currently marketing the LES portfolio for $66,000,000, 332 West 11th Street for $49.95 million, 324-326 Grand Street for $33 million, 306 West 142nd Street and 531 West 159th Street for $44,600,000, and an Opportunity Zone property at 148-150 Attorney Street for $12 million.
Foreign purchasers have included an ultra-high net worth Korean investor for a TriBeCa loft building, an Italian eyewear company for their office at 420 Fifth Avenue and a private investor for a prime SoHo property.
“The key to our success is that we have one unified, sales team that shares in all commissions,” said James Kinsey, Principal and Senior Director of the group. “As a result, investors can speak to any member of our team to navigate our listings and be introduced to one of our asset specialists.”
The Tri-State Investment Sales group finds that investors tend to focus on one particular asset class and will oftentimes consider locations throughout the city, which makes searching for opportunities much easier as opposed to having to jump from one agent and neighborhood to the next.
“In today’s market, it is essential to price listings properly and work with clients who understand the dynamics of the marketplace,” Nelson. “When a client lists with us, we provide confidence that they can transact. As a result, buyers take our listings seriously and are more likely to purchase.”
For a copy of the 2018 Foreign Investment Report, please click here. To sign up for other Tri-State Investment Sales research reports including the 2018 Year in Review Sales Report, New York City Multi-Family Sales Report and the U.S. Net Lease Market Report, please click here.