WASHINGTON, DC—Foreign investors remain eager to invest in US real estate assets with the vast majority, or 90%, of survey respondents noting they will maintain or increase their allocations here over the next twelve months, according to the 23rd Annual Survey taken among the members of the Association of Foreign Investors in Real Estate. Indeed, the US was voted the most stable and secure country for investment, surpassing second-place Germany by 55 percentage points, and third-place UK by 60 percentage points. However, that enthusiasm doesn't necessarily extend to what is ordinarily a top US target market for this group: Washington, DC.

For this year's survey the nation's Capitol was at the bottom of the five-city US ranking; it dropped even further on the list of top global cities to No. 15, down from last year when it was tenth-ranked. "The continued fall of DC surprises me," James A. Fetgatter, CEO of AFIRE tells GlobeSt.com. True, other surveys show a continued appetite for DC real estate among foreign investors but the AFIRE membership tends to be more conservative, Fetgatter says—which makes the AFIRE survey that much more eyebrow raising. "DC is a great market for this group but for several reasons these investors are losing interest or at least growing more cautious about investing here."

Other US cities held their place on AFIRE's list or moved only slightly.

New York has returned to its long-held slots as both the No.1 global and No. 1 US city. Last year was an exception when London nudged it into second place; traditionally New York has held the top rank, both globally and among US cities, since 2010. According to the survey,

The top five global cities are:

1. New York (#2 last year)

2. London (#1 last year)

3. San Francisco (#3 last year)

4. Tokyo (#6 last year, tied with Madrid)

5. Madrid (#6 last year, tied with Tokyo)

The top five US cities are:

1. New York (#1 last year)

2. San Francisco (#2 last year)

3. Houston (#3 last year)

4. Los Angeles (#5 last year)

5. Washington, DC (#4 last year)

There are a number of reasons why Washington DC may be losing its appeal, Fetgatter speculated. The headline news about budget disputes, sequestration and possible debt defaults have spooked investors.

Also the fact that DC is, at its heart, a government town doesn't help either. It hasn't, in other words, developed a sector expertise such as technology or energy or manufacturing, Fetgatter says.

"Outside of the government, DC just isn't perceived as having a strong economic driver."

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Erika Morphy

Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.