International investors likely to increase Phoenix real estate holdings this year, report says

International investors ranked Phoenix highly as a market where they plan to increase their real estate exposure in 2021, according to a study by the Association of Foreign Investors in Real Estate.

The survey collected information from more than 100 respondents, which include institutional investors, fund and investment managers, family offices, publicly listed companies, and related services.

Phoenix did not crack the top 10 list for planned real estate investments this year. The list was topped by Austin, Boston and Dallas. However, Phoenix ranked sixth for places where international investors intended to increase their real estate exposure, with 16% of survey respondents saying they would boost their holdings in Phoenix. Austin, Boston and Dallas again topped that ranking. Only 3% of survey respondents said they planned to decrease their holdings in Phoenix.

According to the study, international investors are most interested in buying apartments or industrial properties, both of which were asset classes that continued to perform well during the pandemic, with both sales and leasing. Intent for office and retail investments have each continued to cool.

About 83% of survey respondents said they were either somewhat concerned or very concerned about diminishing office demand, and 80% said they were concerned about changes in tenant demand. About 78% said they were concerned about increasing construction costs.

The greatest increase in capital flows into the U.S. over the next three to five years is expected to come from Asia and the Pacific, with a 71% net increase in capital flow predicted. Europe followed closely behind with a 69% predicted net increase.

Despite Phoenix failing to place in the top 10 for planned investment in the survey, the city has continued to attract investments from foreign companies and real estate investors.

Arizona’s largest-ever foreign direct investment, Taiwan Semiconductor Manufacturing Co. Ltd.’s plant in north Phoenix, has been announced to be worth $12 billion but sources familiar with the deal have confirmed it will likely be closer to $35 billion. TSMC bought its land in late 2020 for $89 million. Canada-based Apel Extrusions bought 22 acres of land in Phoenix in March for a new headquarters and manufacturing facility that is expected to cost $100 million to develop.

Developer investment in new industrial projects also continues to surge around the Valley this year. Just in the past week, work began on a 1-million-square-foot project in Mesa, while two other projects are in the works in that city.

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