Foreign Investors Ready for U.S. CRE Revival in 2025

As reported by GlobeSt, foreign investors—who remained cautious in recent years—are preparing to reenter the U.S. commercial real estate market in a big way. 

Indeed, industry leaders, including Tal Peri of Union Investment Real Estate, foresee robust CRE investment activity beginning in early 2025.

Optimistic Economics

The Federal Reserve’s recent interest rate cuts are a key factor driving renewed investor interest. Lower rates are reducing the cost of capital while weakening the U.S. dollar, boosting the competitiveness of foreign buyers.

“The rate decreases not only reduce our financing costs but also improve our net performance by strengthening price competitiveness,” Peri explained.

Additionally, the resilience of the U.S. economy and its broad range of global cities make it an attractive target for institutional investors. “The U.S. remains one of the world’s most diversified and scalable investment markets,” said Gunnar Branson, CEO of AFIRE.

New Investment Strategies

Foreign investors are shifting focus to quality assets, emphasizing stable tenants and long-term leases. There is also a growing willingness to explore secondary cities like Denver, Nashville, and Phoenix, moving beyond traditional markets like New York and San Francisco.

The multifamily sector is particularly appealing, as demonstrated by Union Investment’s acquisition of a high-performing apartment complex in Fort Lauderdale, which saw 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 noted.

Navigating Risks

Despite the positive outlook, foreign investors are mindful of challenges, including climate risks in regions like the Gulf Coast, rising insurance costs, and political uncertainties.

“The Southeast is particularly vulnerable to climbing insurance rates due to climate-related risks,” Branson cautioned.

Regulatory hurdles and potential shifts in U.S. trade policies under the current administration also contribute to investor caution. However, the U.S. market’s fundamental appeal remains intact, offering higher returns than many international alternatives.

2025: A Turning Point

Industry experts predict that 2025 could mark a turning point for foreign investment in U.S. CRE, driven by optimism about a market bottom and increasing interest in distressed assets and debt opportunities.

“There’s a growing consensus that we’re at or near the market’s bottom,” Branson explained.

For firms like Union Investment Real Estate, the focus in 2025 will be on strategic acquisitions, with deal volumes ranging from $100M–$300M.

The anticipation of growth and stability makes the U.S. market a compelling proposition for foreign investors seeking diversification and higher returns.

“This is the year we turn the corner,” Branson predicted.