Foreign Investors Ready for U.S. CRE Revival in 2025
A Rebound in Foreign Investment
Foreign investment in U.S. commercial real estate (CRE) is poised for a significant resurgence in 2025 after years of subdued activity. This revival is being driven by favorable economic conditions, including interest rate cuts and a weakening U.S. dollar, which have enhanced the sector's appeal to international buyers.
As reported by GlobeSt, foreign investors—once cautious due to market volatility and economic uncertainty—are preparing to reenter the U.S. CRE market with renewed vigor. Industry leaders predict robust investment activity to emerge as early as the first quarter of 2025.
Economic Optimism Fuels Demand
The Federal Reserve’s recent interest rate cuts are a pivotal factor behind this renewed interest. Lower borrowing costs and a devalued dollar are making U.S. assets more attractive to foreign buyers.
“The rate decreases not only reduce our financing costs but also improve our net performance by strengthening price competitiveness,” said Tal Peri, head of U.S. East Coast and Latin America at Union Investment Real Estate.
Additionally, the U.S. economy’s resilience and its reputation as a diversified investment market have bolstered investor confidence. “The U.S. remains one of the world’s most diversified and scalable investment markets,” noted Gunnar Branson, CEO of the Association of Foreign Investors in Real Estate (AFIRE).
Shifting Strategies: A Focus on Quality
Foreign investors are targeting high-quality CRE assets, prioritizing stable tenants and long-term leases. While traditional gateway cities like New York and San Francisco remain attractive, there’s a notable shift toward secondary markets such as Denver, Nashville, and Phoenix, where growth potential and investment opportunities are abundant.
The multifamily sector has emerged as a key focus area, offering strong returns in a competitive market. Union Investment’s recent acquisition of a high-performing apartment complex in Fort Lauderdale exemplifies this trend, as the property achieved a remarkable 25% rent growth over two years.
“We’re prioritizing multifamily, targeting mid-to-high-rise buildings in city centers and strong mixed-use suburban properties,” Peri explained.
Navigating Risks in a Changing Landscape
While optimism is high, foreign investors are mindful of several challenges, including climate risks in regions like the Gulf Coast, rising insurance costs, and geopolitical uncertainties.
“The Southeast is particularly vulnerable to climbing insurance rates due to climate-related risks,” Branson cautioned. Additionally, regulatory complexities and potential shifts in U.S. trade policies under the current administration remain top concerns.
Despite these hurdles, the U.S. CRE market continues to offer higher returns than many international alternatives, maintaining its appeal as a key destination for global capital.
2025: A Defining Year for U.S. CRE
Industry experts believe 2025 could mark a turning point for foreign investment in U.S. CRE. With many viewing the market as nearing its bottom, there is growing interest in distressed assets and debt opportunities.
“There’s a growing consensus that we’re at or near the market’s bottom,” Branson said, pointing to strategic acquisitions as the key focus for firms like Union Investment. Expected deal volumes range from $100 million to $300 million, underscoring the scale of anticipated activity.
With the potential for growth and stability, the U.S. CRE market remains a compelling choice for foreign investors seeking diversification and higher returns. “This is the year we turn the corner,” Branson predicted confidently.
