Due to increasing global market volatility, it seems that the U.S. is becoming a safe haven for foreign investors. Real estate investment offers foreign investors a tangible and unique investment opportunity in U.S. “trophy assets,” as opposed to the usual route of investing in U.S. equity or U.S. Treasuries. Like “location, location, location” is important for real estate, “diversification, diversification, diversification” is important for a successful portfolio. How are foreign investors diversifying? U.S. real estate assets. Since the housing crisis in 2007-08, the real estate market is making a comeback. Because of this, foreign investors are engaging in a “flight to safety” by investing in U.S. real estate.

 

Why are we exploring this topic? Personally, the three of us have a strong interest in real estate. Kristin, who is hoping to attend law school after graduation, is interested in real estate law. Ryan, who has interned with Berkshire Hathaway, is interested in the reasoning behind foreign investment decisions in Chicago real estate. Phil, an accounting major, is interested in the accounting aspects behind real estate transactions. Based on recommendations from Charles Harbin, a vice president portfolio manager at Heitman, we chose to focus on both developed and emerging markets and their investment interests. These countries include Abu Dhabi, Canada, China, Israel, Japan, Norway, Singapore, and South America. While many Asian and emerging market investors are increasing their shares in U.S. real estate, Canada still remains the largest foreign investor in U.S. real estate assets.

Throughout our analysis, we will be using terms and acronyms specific to real estate investment. For definitions of these terms and for clarification of real estate asset classes, please see our “Investments & Terms” page.