Exclusive: Property investors keen on U.S., Turkey; China stumbles: survey

The United States dominates the list of places that global commercial real estate investors would prefer to put their money this year, while China has lost some luster and Turkey has added sparkle, according to a survey of international investors.

For the first time since 2001, four of the top five cities that investors said they favor were in the United States, according to an annual survey that the Association of Foreign Investors in Real Estate (AFIRE) released Monday.

The survey reflected a sharply more optimistic view of the U.S. economy and property market for this year. Last year, 33 percent held a pessimistic view but 81 percent said they planned to increase their U.S. holdings this year.

In the ranking of global cities in which to invest, New York and London came in Nos. 1 and 2 respectively, as they did last year. But San Francisco rose to third from fifth and Houston, unranked last year, climbed to No. 5.

"Houston was a surprise to us," James Fetgatter, AFIRE chief executive, told Reuters. "San Francisco and Houston being in the top five global cities, it shows that this is where our people think the economy is going to revive. They believe these are where the drivers of the economy are going to be - in energy and tech."

Washington, D.C., while still a favorite, slipped to No. 4 from No. 3, reflecting investors' concerns about how federal budget reductions would affect employment, and therefore the demand for space, in that city.

The survey of the association's nearly 200 members was conducted in the fourth quarter 2012 by the James A Graaskamp Center for Real Estate, Wisconsin School of Business. AFIRE members have an estimated $2 trillion or more in real estate assets under management. Forty-two percent of the investors and 26 percent of the advisers are from the United States.

According to the AFIRE survey, the United States also held its spot as the country investors said provides the most stable and secure real estate investment. Canada, Germany, Australia and the UK followed in the same order as they did last year. Sweden, which was unranked in last year's survey, tied with the UK for fifth place.

The United States also held its spot as the country providing the best opportunity for real estate price appreciation, grabbing 55 percent of the vote. Second-ranked Brazil came in a distant second with 17 percent. The UK moved up to No. 3 from last year's No. 4. Turkey, which was ranked No. 9 last year, flew into fourth place.

CHINA FALTERS, EUROPE ALL BUT DISAPPEARS

China, which had been ranked No. 3 for price appreciation globally, was unranked this year, failing to receive one vote. Its cities also took a hit. Shanghai, ranked No. 5 last year, fell to 12th this year. Hong Kong, No. 8 last year, fell to 19th.

"Everybody is concerned about China's economy slowing, and there's a little uncertainty about the change in leadership," Fetgatter said.

Europe also did not fare well. About 80 percent of the respondents said they believed Europe would likely be in recession this year.

Within the United States, New York remained the No. 1 choice among investors. San Francisco displaced Washington, D.C., in No. 2 as the U.S. capital slipped to third, San Francisco's former spot. Houston was No. 4, up from seventh. Boston, last year's No. 4, was fifth.

Among emerging markets, Brazil once again was ranked No. 1. China repeated in No. 2. However, Turkey moved up to No. 3 from No. 7 last year. India, which had been third, slipped to No. 4 to tie with Mexico, which moved up from fifth.

(Reporting by Ilaina Jonas; Editing by Gary Hill)