New York may be contending with myriad issues including record-high office vacancy rates, but its appeal for global commercial real estate investors remains: The city won back the No. 1 spot as the most favored U.S. market, according to a new survey.
New York moved up from ranking fifth in 2022, beating Atlanta, Austin and Boston, the previous top three cities from the past several years, according to a poll of investors conducted in December and January by the Association of Foreign Investors in Real Estate.
The last time New York held the top ranking was in early 2020, before the pandemic, according to AFIRE, which is made up of 175 institutional investors, pension funds, asset managers and other leading global firms from nearly two dozen countries with about a combined $3 trillion in assets under management.
“While it remains to be seen if this indicates a renewed faith in gateway markets, secondary and tertiary market trends continue to be key to the broader U.S. market,” AFIRE said in a report.
Worldwide, London remains the top global city for investment, followed by New York, according to the group
London may be the favorite global city for investors, but the United States overall is the preferred destination for investment with a 6% increase in investment allocations from 2022, compared with a 5% decline in allocations for European investment, AFIRE said.
As higher interest rates have seized up lending and market activities, some 97% of the respondents in the survey said “the availability and pricing of debt” is hurting transactions while 70% anticipate “meaningful distressed acquisition opportunities in the next six months.”
Among property types, with the pandemic making remote working and hybrid schedules prevalent, global investors in the survey ranked office as the least attractive for U.S. investment, and the most difficult property type for securing financing. Multifamily and industrial properties, on the other hand, were investor favorites. Some 94% of the respondents said they planned to increase U.S. multifamily holdings.
The future of office was just one burning issue on the minds of investors. As increased borrowing costs are “evident across all asset classes,” getting “reasonable financing” is another investor watchpoint, as is so-called environmental, sustainability and governance issues, AFIRE said.