NYC Sees Increased Foreign Investment - Avison Young’s Recent GVA Acquisition Will Help Meet Demand

$Release_Title.getData() 6 Feb 2019

Download the 2018 Foreign Investment Report

Since releasing our 2018 Property Sales Report in mid-January, we produced our 2018 Foreign Investment Report for New York City. In this month’s edition of The Nelson Report I wanted to take you through the foreign investment highlights, analyzing data from Real Capital Analytics.

  • The number of foreign transactions was up 8 percent year-over-year with 64 transactions, while the dollar volume increased 1 percent year-over-year to $8.3 billion, on trend with the overall uptick in market atctivity.
  • Canada led the way in foreign investments in New York City accounting for 41 percent of the total foreign dollar volume. Germany was a distant second at 16 percent and the Netherlands at 12 percent.
  • China was noticeably absent, accounting for only 2 percent of the foreign dollar volume, down from its peak of 11 percent in 2016 when they registered $6.2 billion in purchases. This is likely due to capital controls imposed in China in 2017 on overseas investments in property. Chinese investors are expected to continue to sell more foreign real estate than they buy in 2019.
  • As a percentage of total investment, foreign activity dropped from 26 percent to 19 percent of all sales as domestic buyers gained market share.
  • Office transactions accounted for 59 percent of the dollar volume, with multi-family at 31 percent and retail at 23 percent.
  • Manhattan registered 89 percent of total foreign investment, however, the boroughs did see overall increased activity.

Some of the most active foreign buyers in 2018 include 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.

I 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. With Amazon bringing 25,000 - 40,000 jobs to Long Island City over the next few years, I also expect increased interest in foreign investment in the boroughs, which was only at 11 percent in 2018.

In light of these findings, Avison Young is well-positioned to advise on foreign investment. Our headquarters is located in Canada and we recently expanded in Europe with our acquisition of GVA, one of the U.K.'s leading and most diverse real estate advisory businesses. This means that we are now 5,000 strong, with 120 offices in 20 countries, nearly doubling our size and ability to better source foreign capital and provide clients worldwide a with full service investment sales group.

Avison Young’s Tri-State Investment Sales group is also well-situated to offer foreign investors the best inventory in New York City

“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.”

We have found that investors tend to focus on one particular asset class and will oftentimes consider locations throughout the city. Our approach makes the search for opportunities uncomplicated compared to working with groups that are structured based on territories.

This unique team structure has already lead to immediate traction and success. In 2018, we closed 16 sales for $394 million, including the sale of a Brooklyn development site on Gold Street for $60 million, two office buildings on Bowery for $48.5 million, 190 Prince Street for $19 million, and office condos at 20 West 33rd Street and 420 Fifth Avenue totaling over $80 million. Foreign purchasers included a Korean ultra-high net worth individual for a TriBeCa loft building and an Italian eyewear company for their office at 420 Fifth Avenue.

Currently the group has over 50 active exclusives totaling well over a billion dollars, including a Lower East Side portfolio for $68 million, a Central Brooklyn Portfolio for $66 million, and 306 West 142nd and 531 West 159th streets for $46.5 million.

In today’s market, it is essential to price listings properly and work with clients who understand the dynamics of the marketplace. 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.