Will More Foreign Money Buy NYC Real Estate?

Most New York City-based commercial real estate professionals expect to see an increase in foreign investment in their market over the next 12 months, according to the latest Gotham Commercial Real Estate Monitor published by Marks Paneth LLP.

Real estate investment by foreign buyers in Manhattan reached $24 billion last year alone, with Chinese investors pouring almost $9 billion into this market. The surveyed real estate executives stated that foreign investors would have the biggest impact in the city’s residential market (57 percent), followed by the hotel sector (47 percent), office buildings (37 percent) and retail (30 percent).

“New York City commercial real estate is attractive to foreign buyers looking for a secure safe haven to invest in,” said William Jennings, partner-in-charge of Marks Paneth’s Real Estate Group. “Prices are still appreciating and it’s a bargain compared to Hong Kong or London. In addition, the city’s economy is strong, the quality of life is good and conditions are much more stable than in other parts of the world.”

The interest in the residential market is no surprise, Jennings added, because the federal EB-5 Program provides green cards in exchange for U.S.-based investments. This program has been especially popular with Chinese buyers that are seeking to move money away from their nation’s shaky economy. Jennings added that adjustments made in the U.S. tax code will further raise the level of interest in New York’s commercial properties.

“Recent changes in the tax law that reduce the tax burden for foreign pension funds buying US real estate are likely to attract more investment,” said Jennings.