Foreign investors can’t seem to get enough of Downtown D.C. office buildings. So far in 2013, they’ve purchased, or are under contract to buy, nearly $1.9 billion in D.C. office properties, topping the $1 billion total for all of 2012, and more than double the $807 million handed over in 2011, according to a Washington Post article published today. Overall, foreign sales account for a whopping 75 percent of all investments in D.C. commercial real estate this year. Why? Federal government stimulus spending has helped D.C. emerge from the recession more quickly than most commercial centers. The fanfare, hasn’t rubbed off on nearby suburbs, struggling with both sluggish leasing and growing vacancy.
Investors from countries such as Korea, China, Germany and Saudi Arabia are aggressively in search of fully leased office buildings here, according to Lang LaSalle, the commercial real estate services firm that assembled the data. Abu Dhabi and Qatar are already primary investors in Downtown’s huge Marriott Marquis Convention Center Hotel and CityCenterDC mixed-use development, respectively. Today, the average deal here is about $275 million, versus about $75 million 10 years ago. And according to the 2012 Association of Foreign Investors in Real Estate (AFIRE) rankings, D.C. placed third behind New York and San Francisco as a top investment market favored by foreign investors.
Gerry Widdicombe, the BID’s economic director, cautions there’s some $60-$70 billion of commercial real estate in D.C., another $15-$20 billion in multi-family housing, and some foreign purchases in the early 2000s that were recently sold. “So recent foreign investments are still a relatively small percentage of D.C.’s income-producing real estate ownership, and these investors are primarily interested in a narrow band of the DC market– trophy office buildings in prime locations, or new ‘high quality’ projects like CityCenterDC or the Marriott Marquis, also in prime locations,” he said. “Several commodity Class A office buildings are currently being marketed for sale, but do not appear to be attracting foreign interest.”
[This article was updated on July 2, 2013]