After a rebound in 2012, FDI into the real estate industry took a sharp dive in 2013. Between January and November of 2013, investors launched 23% fewer projects than in the same period of 2012, according to data from investment monitor fDi Markets.
With 303 ventures started in 2013, the year looks set to become the worst since 2003, when fDi Markets began tracking greenfield foreign investments into commercial and residential real estate, excluding portfolio investments.
Asia on the up
However, there are still locations with reason to celebrate. With eight projects started in 2013, Jakarta emerged as the leading location worldwide for real estate investment. The Indonesian capital benefited mostly from new ventures into residential building construction, as well as rental and leasing services.
The past year was also good for another south Asian country, Myanmar. The wave of reforms started in 2010, after the election of a new military-backed civilian government, succeeded in putting the country on investors’ radars. Yangon, the country's former capital, recorded the same number of new crossborder real estate projects as Beijing and Singapore, and jumped into the top 10 of the most popular real estate FDI destinations in 2013.
The majority of real estate investments into Yangon were in industrial building construction and real estate services, with Vietnamese companies accounting for 60% of all new ventures and investing more than $590m in the sector. Meanwhile, two-thirds of all crossborder projects launched in Jakarta originated in Malaysia and Australia.
Increased activity of regional investors in the Asia-Pacific region is a new trend that will most likely last beyond 2013, according to experts from consultancy PricewaterhouseCoopers (PwC) and Washington, DC-based non-profit research organisation Urban Land Institute (ULI) in their report Asia Pacific Emerging Trends in Real Estate 2014. “Asian capital has become increasingly dominant in the post-global financial crisis environment, especially given the substantial volumes of capital being exported from individual Asian countries... across the region. This can be expected to continue in 2014,” says the report.
East on top in Europe
Over in Europe, Warsaw emerged as the city with the biggest growth year on year in the number of real estate investments. In 2013, the Polish capital secured five ventures and joined London and Bucharest as a leading destination for the sector in Europe. All investors that chose Warsaw in 2013 came from western Europe, with Belgian developer Ghelamco, which launched three projects in the city, the most active.
The past year was also good for Russia's two biggest cities, Moscow and St Petersburg. Both cities emerged in 2013 as top destinations for FDI in real estate, with Moscow landing a $450m investment into a mixed-use development from Turkish conglomerate Enka TC, and St Petersburg attracting $334m from Finnish developer SRV Group, which is planning to build a shopping centre in the city.
Dubai still dominates
In the Middle East and Africa, Dubai remained the most popular destination for crossborder investments in the property sector. While the number of projects in the region as a whole decreased by 34%, the capital inflows grew by an impressive 153% to $3.42bn, fuelled by investments into north Africa and sub-Saharan Africa.
The biggest recorded investment into the region was launched in the Moroccan city of Tangier, where Spanish developer Inveravante Inversiones Universales is building a luxury residential and leisure complex at an estimated cost of $254m. According to a report released in July 2013 by London-headquartered real estate agency Aylesford International, the increased demand for luxury property in Morocco can be linked to a growing expat community in the country, as well as its political stability when compared with other north African states.
Small shifts in Americas
Brazil remains a lead destination for real estate-related FDI into Latin America, but despite the construction frenzy connected with the 2014 Football World Cup and 2016 Summer Olympics, both hosted by Brazil, the number of crossborder real estate ventures launched in the country decreased by half.
Meanwhile Peru, a country that recorded only one new foreign real estate project in 2012, secured a number of commercial developments and rose to become the second most popular destination after Brazil in 2013. Characteristically, investments into Peru were not located in one urban area, but spread across four locations. An increase in the number of investments into Peru might be seen as a switch from big but tricky markets such as Brazil and Argentina, into smaller, more business-friendly environments.
In North America, New York became the most popular investment destination for real estate in 2013, reporting an increase of more than 66% in FDI projects in real estate. The megalopolis is joined at the top of the table by Birmingham, Alabama, and Charlotte, North Carolina. Both Birmingham and Charlotte predominantly attracted ventures specialising in real estate services.
Overall, although the number of investments into the sector in North America declined only slightly, from 131 in 2012 to 116 in 2013, the total value of capital brought by crossborder investment declined fourfold. However, the 2014 North American real estate outlook, prepared jointly by PwC and ULI, says 2014 will most likely bring more positive news for the region. “The difference for 2014 is that the market has progressed further through the economic and real estate cycles, and we are now seeing real evidence that the trends have the momentum to finally make an impact on the real estate market,” says the report.
Among the most active crossborder investors in real estate in 2013, similar to 2012, were companies based in the US, the UK and firms registered in Luxembourg. The list of the top investors changed, however. Regus, a global office space provider, launched 20 projects in 2013 and became the leading investor in real estate worldwide, while Avison Young, a Canadian-owned real estate firm and a leading investor in 2012, started only five projects.
The biggest investment in 2013 came from Emaar Properties, a realtor based in the United Arab Emirates that is planning to launch a $3bn leisure project in the Iraqi city of Sulaimaniya. By comparison, the largest investment in 2012, estimated at $1bn, was made by Hong Kong-based developer Swire Properties, which plans to construct a mixed-use development in central Miami.