How Foreign Investors See US Commercial Real Estate | Gunnar Branson, AFIRE
AFIRE CEO Gunnar Branson discusses foreign institutional investors' perspectives on U.S. commercial real estate, revealing a significant shift toward infrastructure and data center investments while office real estate emerges as an attractive opportunity despite previous pessimism. Foreign investors remain bullish on the U.S. long-term despite near-term concerns about political volatility, energy constraints, and housing affordability.
Summary
Gunnar Branson, CEO of AFIRE (Association of Foreign Investors in Real Estate), presents findings from AFIRE's mid-year pulse survey of institutional investors from 24 countries regarding their U.S. real estate investment strategies. The survey reveals a notable shift in asset class preferences away from traditional favorites. While industrial and multifamily remain top choices, office has surprisingly risen to third place as investors identify attractive opportunities in repriced assets, particularly in constrained markets like New York where Class A office space is scarce. This represents a reversal from years of office being avoided.
The most significant trend is a pivot toward infrastructure investments, particularly data centers driven by AI and data demand. This infrastructure focus reflects a longer-term investment philosophy among foreign institutions, with many making direct investments in energy infrastructure to support data center development. Energy availability and cost are now primary considerations when selecting markets, representing a substantial change from energy previously being an invisible factor in investment decisions.
Regarding the broader U.S. economy, foreign investors express paradoxical views. Macro indicators—GDP growth, demographics, and employment—receive overwhelmingly positive assessments. However, 90% of respondents view U.S. and geopolitical politics as a significant negative force on investment strategy. This political uncertainty, combined with currency volatility, inflation concerns, and interest rate questions, creates investor hesitation. Yet despite these concerns, 94% of respondents believe this is a time for long-term investing, suggesting many foreign institutions view current volatility as an opportunity rather than a deterrent.
Housing affordability emerges as a major concern and investment opportunity. The survey shows increasing worry about household fiscal health, with nearly 20% believing households are at a breaking point, and 55% believing they're one problem away from crisis. Foreign investors are exploring multiple strategies to address housing supply shortages, including single-family rentals, manufactured housing, multifamily development, and workforce housing. Manufactured housing is highlighted as particularly promising, citing Japan's success in maintaining affordability through modular construction. Investors recognize they must work collaboratively with municipalities to reduce regulatory delays and construction costs.
The U.S. maintains competitive advantages for foreign investment: it represents nearly half of global institutional real estate, offers diverse investment strategies across multiple major markets (New York, Los Angeles, Atlanta, Austin, Nashville), and provides stable legal and currency frameworks. Younger, dynamic cities with mixed-use development—where people live, work, and play—are outperforming single-use downtowns. However, concerns exist regarding immigration restrictions impacting construction labor and visa issues potentially deterring international students, which has long-term implications for future investment relationships.
About this episode
Where are foreign investors putting capital in US commercial real estate? Michael Bull, CCIM asks Gunnar Branson, CEO of AFIRE, what the mid-year Pulse shows. Gunnar Branson leads AFIRE, the Association of Foreign Investors in Real Estate, whose members are institutional investors from 24 countries. Twice a year AFIRE surveys them on their US allocations, risks, and opportunities. This year's headline is a turn toward infrastructure and energy. Data centers are pulling institutional capital, and for the first time a majority of respondents say energy availability and cost shape where they invest. On property types, industrial still tops the wish list and multifamily follows, but office has climbed to number 3. Gunnar explains why New York has almost no Class A office space available, why retail's comeback is the model for office, and why mixed-use, 24/7 neighborhoods are winning tenants. Michael shares why he calls office the buy of the decade, with a 200,000 square foot tower coming to market at about $64 a foot. The conversation also covers the US economy (90% of respondents see politics as a negative force on investment, while 94% say this is a time for long-term investing), Japanese capital and the weak yen, why nearly half of the world's institutional quality real estate sits in the US, the housing affordability gap, build-to-rent and manufactured housing, household financial stress, tariffs and immigrant labor, and why location still matters. In this episode:00:00 Introduction: how foreign investors view the US01:25 The AFIRE Pulse: institutional investors from 24 countries02:22 From real estate to infrastructure: data centers lead04:56 Generational capital and the long-term US view05:28 Europe and the Middle East: a pause in new investment06:11 Data centers: top opportunity and top risk07:17 Office climbs to #3 behind industrial and multifamily09:15 Office as the buy of the decade: lessons from retail11:37 Buying office at $64 a foot: the low-basis play12:27 US economy: strong growth, 90% see politics as a negative14:52 Japanese capital, the yen, and long-term thinking15:42 Why the US wins: nearly half of institutional real estate18:09 The housing shortage and affordability19:07 Build-to-rent, single family rentals, and manufactured housing24:02 Household stress: 19% now at the breaking point25:19 The biggest headline: energy infrastructure27:44 Beyond the capital stack: new players in real estate29:07 Tariffs, reshoring, and immigrant labor costs31:48 Visas, universities, and where capital follows33:35 Location, location: why investors favor vibrant cities Connect with Gunnar Branson:https://www.linkedin.com/in/gunnarbranson/AFIRE Website: https://www.afire.org/ Connect with Michael Bull & The Show:Michael Bull, CCIMBull Realty, Inchttps://www.linkedin.com/in/michaelbull/ For more commercial real estate market data, sector forecasts, and video episodes, visit CREshow.com. America's Commercial Real Estate Show is brought to you by our proud sponsors. TCN Worldwide: Commercial real estate property management, leasing, and sales solutions across the US and globally. Learn more: https://www.tcnworldwide.com Build Out: The ultimate product suite for commercial real estate brokerage firms looking to streamline their business. Learn more: https://www.buildout.com Bull Realty: Regional commercial real estate brokerage services headquartered in Atlanta, delivering market intel and strategies. Learn more: https://www.bullrealty.com Commercial Agent Success Strategies: Twenty-one cloud accessed commercial broker training videos with slide deck action notes. Learn more at https://www.commercialagentsuccess.com/ #CommercialRealEstate #CRE #ForeignInvestment #RealEstateInvesting #AFIRE #DataCenters#Infrastructure #OfficeMarket #Multifamily #IndustrialRealEstate #AffordableHousing #CREShow
Key Insights
- AFIRE's survey found that office real estate has risen to third place in foreign investor preferences, contradicting years of bearish sentiment, as investors identify repricing opportunities and recognize constrained supply in markets like New York where no Class A office is available
- Foreign investors are shifting capital toward infrastructure, particularly data centers and energy projects, viewing these as longer-term plays aligned with pension fund and sovereign wealth fund generational investment horizons rather than short-term returns
- Despite positive macro indicators on U.S. GDP growth, demographics, and employment, 90% of foreign investors identify U.S. and geopolitical politics as a real negative force on investment strategy, creating a paradoxical optimism-pessimism dynamic
- Nearly 20% of surveyed institutional investors believe U.S. households are at a financial breaking point, with 55% believing they are one problem away from crisis, driven by housing costs consuming more than one-third of income
- Energy infrastructure has shifted from invisible to critical in investment decisions, with investors now making direct energy investments and selecting markets based on power availability and cost, not just traditional real estate metrics
- Foreign institutional investors are pursuing diverse housing solutions including single-family rentals, manufactured housing, and workforce housing because they recognize the entire income spectrum faces affordability pressures, not just low-income populations
- The U.S. advantage over other developed markets includes representing nearly half of global institutional real estate, offering at least a dozen viable major markets with different growth stories, and providing diverse investment strategies impossible to replicate in other countries
- Immigration restrictions and visa issues are emerging as under-the-radar concerns that could impact long-term foreign investment flows, as the relationship between international university attendance, personal networks, and cross-border investment capital has proven historically significant
Topics
Transcript
Welcome to America's Commercial Real Estate Show, your source for market intel, forecasts, and strategies. Hello, I'm Michael Bull. Thank you for being with us. Our show today is brought to you by TCN Worldwide. If you need commercial real estate brokerage services anywhere in the world, check out TCNWorldwide.com. I just came back from the National Conference in South Beach. Great group of brokers and shops all around the world for leasing, acquisitions, dispositions, or property management. TCNWorldwide.com. And speaking of worldwide, our show today is taking in the entire world, or at least the entire world's view of the U.S. You know, one of the things I think is interesting for us domestically here at the U.S. is…
Full transcript available for MurmurCast members
Sign Up to AccessMore from America‘s Commercial Real Estate Show
Commercial Real Estate Recovery: Where the Opportunities Are | Rich Hill, Principal
Rich Hill from Principal Asset Management discusses the commercial real estate recovery, emphasizing that opportunities exist across all property types but with significant dispersion in returns. He identifies selective opportunities in multifamily housing, built-to-rent, senior housing, power centers, and top-tier office properties, while cautioning against broad-based investments in Class A apartments and Class B/C office due to white-collar employment risks from AI.
Retail Sales Outlook: Why Shoppers Keep Spending | NRF Chief Economist Mark Matthews
Mark Matthews, Chief Economist for the National Retail Federation, discusses strong retail sales growth at 5.3% (exceeding the forecasted 4.4%), driven primarily by real growth rather than inflation. Despite consumer anxiety about gas prices, inflation, and geopolitical concerns, spending remains robust—particularly among high-income households—due to factors like tax refunds and consumers' prioritization of spending on family and gifts.