Foreign Investment Spikes in Washington D.C.

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Foreign investment in office property in the District of Columbia is up 83.3 percent from a year ago, despite a flat overall leasing market.

Overseas buyers have already committed $1.9 billion to office buildings in the district, compared to $1 billion invested in all of 2012 and $807 million in 2011, Jones Lang LaSalle reports.

In 2012, 30 percent of the buildings sold to foreign entities compared to an annual average of 17 percent since 2000, JLL reports.

"Interest among foreign investors in the Washington market remains extremely strong," said Scott Homa, vice president research, Jones Lang LaSalle.

The foreign interest is a contrast to the performance of the overall leasing market, which was "statistically one of the flattest ever for the office leasing market," JLL reports. Government cutbacks and the effect of sequester process are taking a toll on the market.

But foreign investors sees D.C. as a relatively stable market with quality assets.

"Washington remains an extremely attractive investment environment from a global standpoint despite government spending cutbacks and overall budgetary uncertainty," Bill Prutting, managing director, Jones Lang LaSalle said. "Foreign investors are expected to remain active in Washington and are likely to continue to pay top-dollar for stabilized, core assets."

Although the D.C. market has been traditionally popular with overseas investors, "more exotic investors" from overseas are entering the market, Mr. Prutting told the Washington Post.

This year's deals include $300 million invested in a portfolio controlled by Carr Properties by Alony Hetz Properties and Investments, an Israeli real estate investment company, and the purchase of an 11-story building by Fosterlane Management, the American real estate arm of the Kuwait Investment Authority, a sovereign wealth fund.

In February, the Norwegian Government Pension Fund Global paid $600 million for five East Coast office buildings, including the Evening Star Building in Washington D.C.

Foreign investors are also backing some of the district's biggest construction projects. An Abu Dhabi fund is backing the Marriott Marquis Convention Center Hotel, while Qatar is a primary investor in CityCenterDC.