|
|
By National Realty on
3/12/2009 8:30 PM
World's Best Places For Real Estate Buys
Ten cities investors will target in 2009.
Washington, D.C., traditionally takes a back seat to world cities like London, New York and Tokyo when it comes to real estate investment.
That's likely to change.
Thanks to a proposed $1 trillion wave government spending, investors are flocking to D.C. for opportunities in the commercial and residential real estate markets. All these new programs will need offices, after all, and their employees will need places to live.
This year, Washington leapfrogged London for the first-place ranking in the world's best cities for real estate investment. But don't count out the world's financial capitals just yet--even with massive financial troubles in London and New York, those cities finished second and third, respectively.
Why? It's the appeal of long-term stability, and fears that emerging countries are going to take a harder hit. While the U.S. property market sputters, China is poised for its worst deflation in a decade, focused heavily on property price declines, according to Deutsche Bank (nyse: DB - news - people ).
"For the U.S. and U.K., part of it is flying back to safety," says François Ortalo-Magne, a real estate professor at the Wisconsin School of Business. " For China and India, there's a sense that we went there and tried it, but it wasn't producing."
Behind the Numbers
Forbes' rankings come from the Association of Foreign Investors in Real Estate, a research association that tracks where member investors are finding the best opportunities around the world. AFIRE surveys its 200 members, who collectively hold $700 billion in cross-border real estate.
U.S. cities surged up this year's list: San Francisco moved to sixth from 24th last year; Los Angeles moved to seventh from 19th; Houston moved to eigth from 32nd. Cities in the Asia Pacific region dropped: Sydney fell to 11th from ninth; Hong Kong dropped to 22nd from 10th place.
This year, investors know that valuations can't be trusted. In 2008, the American residential market fell 19%, according to the Case-Shiller index; U.K. prices dropped 16% according to Nationwide, a U.K. builder. Commercial values in both countries have started to soften due to recessions on either side of the pond.
In 2008, investors to spend tried to call the bottom and gambled in emerging markets. This year, they're looking at premium locations in cities with proven track records.
"We don't feel comfortable that we are able to identify what value is," says Richard Kessler, chief operating officer of Benenson Capital Partners, a global real estate investment group. "Having said that, if an opportunity exists on Park and 57th Street, or something we've always wanted to own on Pennsylvania Avenue in D.C., or some other very strategic long-term asset, we would look at it."
That makes 2009 the year of playing it safe and not chasing exotic opportunities in far-flung locations. It's even injected a sense of humility into the investing world.
"There used to be a rivalry between New York and London," says Kenneth Patton, divisional dean of the New York University Schack Institute of Real Estate. "The subject has shifted to the fact that we're both in the same lifeboat, and maybe it's leaking."
While some investors play it safe, others are content to wait out the real estate downturn entirely.
"Most of the [usual] participants are sitting on the sidelines," says Kessler. "There's a lot of capital, but everyone is uncomfortable about deploying that capital."
For their part, the optimists think 2009 might be the year that sideline money starts to come back into the marketplace--and, especially for the cities on this list, it will come back in a flood, not a trickle.
"There's a lot of money that needs to be invested, says Ortalo-Magne. "The instant people feel an inkling of a turnaround, money is going to flow in."
Whether that inkling comes in 2009 or 2010, however, is an altogether different question.
|
By National Realty on
3/12/2009 8:17 PM
Look out, New York. Washington is gaining on you.
As the nation's most populous metro area feels Wall Street's pain, the fourth-largest—Washington—is barely sensing the recession. In fact, Moody's Economy.com estimates that metro Washington's economy will actually grow 2.5% from mid-2008 through mid-2010. New York's economy is expected to shrink 4.2%.
It wouldn't be the first time that Washington benefited from a national crisis. Back in 1930 the District of Columbia was a quiet Southern town, scoffed at by New York sophisticates. But as the federal government ramped up to fight first the Great Depression and then World War II, its population grew 65% in two decades, vs. just 14% for New York City.
This time Washington is getting a boost from government spending to fight the recession and fix the financial system, as well as the ongoing expenses of fighting wars in Iraq and Afghanistan and promoting homeland security. While President Barack Obama pointedly left Washington for Denver to sign the $787 billion stimulus package on Feb. 17, locals expect the metro area to garner a big share of the dollars.
Where Home Sales Rise
"Oversight alone will [mean] tons of new jobs," enthuses Jill Landsman, a spokeswoman for the Northern Virginia Assn. of Realtors, who says the pace of home sales has picked up over the past year even as prices have continued to fall.
Job-seeking Wall Streeters who jump on Amtrak's Acela to Washington may be dismayed to find that the maximum pay for an FDIC bank review examiner is close to $180,000. That's great for most folks, but paltry next to the bonus-swelled compensation many bankers are used to. The pay can be a lot better, though, at the Beltway Bandit consulting firms that are ramping up to assist the FDIC, Treasury Dept., and others. Consulting jobs for senior specialists in finance "can pay north of $200 an hour," says Andrew Reina, a practice director for risk consultant Ajilon Solutions.
Companies such as Computer Sciences Corp. ( CSC), Science Applications International Corp., or SAIC ( SAI), and Booz Allen Hamilton employ tens of thousands of people in the Washington area and continue to expand. Even before the current crisis, professional and business services, which include private-sector lawyers, accountants, engineers, and consultants, made up 21% of metro Washington's annual economic output, even more than the 20% made up by government itself, according to a BusinessWeek estimate based on government data. The financial crisis "creates opportunities for companies like ours" to provide expert assistance, says David Booth, Computer Sciences Corp.'s president of global sales and marketing.
The New Talent Magnet
By at least one measure, it's Washington rather than New York that's attracting the best and brightest these days: According to George Mason University's Center for Regional Analysis, metro Washington leads the nation in the share of jobs that are in high-tech and the share of workers with advanced degrees.
As for New York, the mix—and the outlook—is bleak. Finance typically accounts for 32% of the metro region's output, mostly because finance jobs pay so well. But pay limits, combined with job cuts, will harm everything from condos to car dealerships. New York State Labor Dept. analyst James Brown says, "There will still be a need for capital-raising, but it's pretty clear the sector won't be as profitable or as large."
Adds Moody's Economy.com economist Marisa Di Natale: "New York, we think, is going to have a pretty severe recession."
Staging a Comeback?
In one measure of how dire things have gotten for New York's finance sector, Mayor Michael Bloomberg on Feb. 18 announced a $45 million plan to retrain investment bankers, traders, and others who have lost jobs on Wall Street. The money will also provide startup money and office space for new businesses by the former Wall Streeters. According to The New York Times, city officials expect New York to lose 65,000 jobs in finance during this recession, and not gain them back any time soon. "We say good luck to the people in New York. We know they're going through some tough times," says Arnold Punaro, general manager of SAIC's Washington operations.
Then again, there is one resource that New York has in abundance, and that's self-confidence. Regional Plan Assn. President Robert Yaro, whose nonprofit organization coordinates planning in a 31-county area, says New York has been declared dead over and over since the 1880s, but always springs back.
"The fundamental strength," says Yaro, "is that every 24-year-old in America and the world wants to be here. Because every other place seems kind of sleepy."
Coy is BusinessWeek's Economics editor.
|
|
 |
 |
|
|
|