Amid the backdrop of the pandemic, foreign investors, who had been on the sidelines, reentered the city’s sales market in 2023, marking the highest proportion of the total buyer pool since 2019. According to a report by brokerage Avison Young, international buyers comprised 32.4 percent of the city’s investors this year. This surge surpassed the figures for both 2021 and 2022 and slightly edged out the 32.3 percent recorded in 2020. As of mid-December, the dollar volume for 2023 had tripled year-over-year, propelling New York City back to the forefront as the prime destination for foreign investment, as outlined in the Avison Young report. The tightening of financing markets in early 2023, exacerbated by the rate hikes of 2022, prompted domestic investors to scale back. This created an opening for overseas buyers, who, equipped with substantial capital, could forgo the need for loans. James Nelson, Avison Young’s head of tri-state investment sales, noted, “Once financing became more expensive and began to dry up, I think that’s when the foreign investors, being cash buyers, were able to compete.”
The primary buyers of city real estate by dollar volume in 2023 were Qatar and Japan, securing the top two positions. Qatar-based firms closed deals surpassing $1 billion, while Japanese investors accounted for just under $1 billion. Japanese buyers were attracted by depreciation benefits and superior returns, explained Avison Young broker Brandon Polakoff. With the yield on the 10-year Japanese government bond remaining below 1 percent throughout 2023, compared to the approximately 4 percent average for the U.S. 10-year treasury rate, the appeal for Japanese investors was evident. Foreign buyers predominantly gravitated towards stabilized assets, evident in recent transactions. In the fourth quarter, Japanese investors concluded deals on three fully occupied, gut-renovated properties, totaling around $35 million. Examples of these transactions included the sale of 96 Sterling Place in Park Slope to Japanese investment firm Sow Kousan for about $17 million and 422 East 81st Street on the Upper East Side to Shink for approximately $11 million, both confirmed by property records. Additionally, Peak Capital Advisors and JAM Real Estate Partners sold 355 East 50th Street for $8 million to Kenbishi Sake Brewing, Japan’s inaugural branded sake brewery.
Looking ahead, if the Federal Reserve implements its projected three rate cuts next year, foreign investors may take a back seat to domestic buyers due to more affordable financing stimulating local demand. “I don’t think foreign buyers are going to be counted out,” asserted Nelson, “but they definitely will have more competition from U.S.-based investors next year.”
Source: The Real Deal