In fact, foreign investment has become so central to Washington CRE that its temporary contraction in 2016 appears to have prompted a substantial slowdown in the city's multifamily market.

A Strong Showing Following an Unprecedented Downturn

Each year, the Association of Foreign Investors in Real Estate conduct a Foreign Investment Survey. In the edition published in January 2017, Washington ranked lower than New York City, Los Angeles, Boston, Seattle, and San Francisco, marking the first time in the survey's 25-year history that the capital placed outside the top five American cities for foreign real estate investment. In 2003, 2004, and 2008, AFIRE ranked Washington the top city for foreign real estate investment in the world, and the city never placed lower than fourth globally between 2003 and 2012.

This unprecedented downturn was particularly felt in Washington's multifamily market, as foreign investors were responsible for a mere 4 percent of multifamily sales in 2016. Not only did that represent a sizeable drop from 15 percent the previous year, but it placed Washington below the 2016 national average of 6 percent.

According to Reonomy data, sales of multifamily assets in Washington closely mirrored foreign investors' spending during this period. Between 2013 and 2014, multifamily sales in Washington increased by 9.5 percent, a YoY growth rate that jumped to 13.6 percent between 2014 and 2015. From 2015 to 2016, sales still increased, but by a modest 2.6 percent. What's more, YoY growth in multifamily sales jumped back up to 11.0 percent between 2016 and 2017, and the second quarter of this year saw the highest volume of sales since Q2 2005.

A Positive Outlook for the Future of Washington CRE

As the post-2016 recovery highlighted by our data might lead one to assume, Washington fared far better in this year's AFIRE survey — it placed fourth after New York, Los Angeles, and Seattle.

A number of factors support a positive outlook both for the capital's multifamily market and for CRE markets overall. Despite a flood of over 6,000 new multifamily units in 2017, Washington's Class A vacancy decreased by 20 basis points over the course of the year, indicating strong continued demand for housing in the city.

Perhaps more importantly, the Trump Administration's renewal of the EB-5 Immigrant Investor Visa Program—a program which played a central role in Mayor Bowser's pitch to Chinese investors—lays the groundwork for continued foreign investment in Washington's CRE markets. “What we do in [NoMa] is really the heart and soul of what EB-5 was intended to be used for,” explains Angelique Brunner, President of EB5 Capital, a firm that connects foreign investors with domestic developers. “[And] we will continue to invest in this neighborhood until it's complete.”

Ultimately, 2016 serves as proof of the tremendous influence foreign investors wield over the fortunes of Washington's commercial real estate markets. We shouldn't be surprised to see future mayors replicating Mayor Bowser's ventures abroad — and with good reason.

Rich Sarkis is the CEO of Reonomy. The views expressed here are the author's own and not that of ALM's Real Estate Media Group.