Many investors are entering the multifamily market for the first-time by pulling money out of the stock market. There is also a tremendous increase in the amount of foreign investment in United States.
In 2001, foreign investment in U.S. real estate was estimated at $44 billion. Japan led the way contributing 28 percent, followed by Canada, Germany, The Netherlands, and England. Since the events of Sept.11 there have been efforts to put limits of foreign investments, but this impending legislation has faced strong opposition from many sources. Foreign investment comes from both public and private sources, but private investment currently doubles that of other sources. This will probably continue for the foreseeable future unless obstacles are put into place. The United States is universally viewed as the safest investment market in the world.
So how long will all this last? The answer is anybody’s guess. There is currently a tremendous housing shortage in many areas across the United States, however a sudden rise in interest rates, overdevelopment, prolonged military action, or another economic downturn could all have a devastating impact on the real estate markets. As we learned from Wall Street, investors should have well defined objectives and exit strategies for their investments and pay attention to warning signs.
–Scott K. Lunine is managing director and Lawrence Andrews is a senior vice president of Sperry Van Ness Commercial Real Estate Advisors.