Understanding the Pulse of Foreign Investment in U.S. Commercial Real Estate
Welcome to America’s Commercial Real Estate Show, where we provide insights, forecasts, and strategies for navigating today’s dynamic market. I’m Michael Bull, and today we’re exploring the intersection of international investment and U.S. commercial real estate. This episode is brought to you by Bull Realty, specialists in office buildings, retail, senior living, self-storage, and multifamily properties across the Southeast. For inquiries, reach out at michael@bullrealty.com.
The Global Perspective
One of the most intriguing aspects of commercial real estate today is how international investors view the U.S. market. Amid tariffs, shifting trade policies, and political uncertainty, foreign investors are carefully weighing their strategies: Are they increasing allocations, holding back, or seizing new opportunities? To answer these questions, Gunnar Branson, CEO of AFIRE (Association of Foreign Investors in Real Estate gave some information.
Insights from the AFIRE Pulse Report
AFIRE’s recent Pulse Report, conducted in August, surveys foreign investors to capture their intentions and strategies. Comparing current data with previous reports highlights how sentiment is shifting in response to global and domestic developments.
Earlier this year, there was broad consensus that 2025 would be a promising time to invest in U.S. commercial real estate, viewed as the bottom of a cycle with growth potential ahead. However, political friction, evolving trade policies, and global economic uncertainty have caused some regions—particularly Canada and Europe—to pause. Despite this caution, U.S. commercial real estate fundamentals remain strong, representing over half of the global institutional real estate market and making avoidance difficult for cross-border investors.
Navigating Risk and Opportunity
Key concerns for international investors include tariffs and potential changes to tax provisions. While some proposed punitive “revenge taxes” did not move forward, their consideration signals the regulatory risks investors must navigate. As a result, many are taking a “wait-and-see” approach while evaluating asset values in markets with recent devaluations.
Interestingly, regional trends show a shift from West to East. Australian and Japanese investors are actively increasing allocations, driven by favorable demographics and substantial pension funds seeking long-term opportunities. Europe and Canada remain cautious, with activity tempered by political and regulatory uncertainty.
Market Sentiment vs. Fundamentals
Despite a cautious outlook, many investors recognize the strategic timing to invest. The Pulse Report shows that while 63% of investors hold a negative short-term view on U.S. cross-border investment, many still plan to increase allocations, acknowledging strong market fundamentals. Experienced investors understand that judicious moves at this point in the cycle can yield favorable long-term results.
Regional Hotspots and Emerging Considerations
The Sunbelt continues to attract institutional interest, with Texas, Georgia, Florida, and Arizona leading the way. At the same time, investors are monitoring risks such as infrastructure stress, energy supply, and water availability. The Great Lakes region is gaining appeal for its affordability and available housing—particularly important for young talent seeking quality homes at reasonable costs.
Energy considerations are becoming increasingly critical. With the rise of data centers and other high-consumption sectors, investors are factoring energy costs, availability, and the transition to renewables into their underwriting. Over 85% of surveyed investors expect energy considerations to play a central role in investment decisions over the next decade.
Tackling Housing Affordability
Gunnar Branson also emphasized a pressing challenge affecting both residential and commercial markets: housing affordability. The U.S. faces a shortage of seven to nine million housing units, a deficit driving up costs and pushing more people to spend over a third of their income on housing.
Historically, affordability fueled migration to Sunbelt markets, but Gunnar notes that this advantage is eroding in many regions. Zoning restrictions, local opposition, and regulatory barriers limit new housing supply—even in high-demand areas like Manhattan, where job growth has outpaced housing development.
Over 75% of respondents to the survey believe public-private partnerships are essential to alleviating the housing shortage. Collaboration between private developers and local governments can unlock new housing opportunities, streamline zoning approvals, and improve affordability. Gunnar cautions that rent control, while popular, often slows the creation of new housing and exacerbates affordability challenges.
Practical strategies include revising parking requirements, allowing higher-density developments, and embracing accessory dwelling units. Cities like California and Chicago are experimenting with creative solutions such as converting basements or pool houses into rental units. Thoughtful density, Gunnar stresses, can increase overall property values while addressing housing needs, countering fears that multifamily housing depresses single-family home values.
Institutional investors are increasingly focused on housing, from traditional apartments to single-family rentals. Gunnar highlights that these investors are committed not only to returns but also to supporting affordability.
Interest Rates and Investment Strategy
Interest rates remain a crucial consideration for investors. While Federal Reserve actions influence markets, Gunnar notes that bond market dynamics and inflation expectations play a larger role in determining actual rates. Investors should act cautiously and strategically, as opportunities can arise—and disappear—quickly.
Despite these uncertainties, Gunnar sees long-term optimism. International investors remain interested in U.S. real estate, drawn by strong fundamentals even amid volatility. Success will come to those who balance caution with proactive engagement, focus on housing solutions, and invest wisely across residential and commercial sectors.
Conclusion
Housing is a foundational component of community and economic success. Without sufficient supply, cities and economies struggle to grow. But with thoughtful policies, smart investment, and collaboration between public and private sectors, the U.S. can address its housing shortage while supporting economic growth and social well-being.