Despite pandemic and slowing economy US property market remains attractive to investors

Multi-family, office and industrial segments continue to offer attractive returns, experts say

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There are strong opportunities to invest in the US real estate sector despite the slowing down of the economy due to coronavirus pandemic, according to experts.

“We are negative and bearish on hospitality and retail sector but bullish on select multi-family, office and industrial segments because of continued demand,” said Ian Russ, managing partner of Delta Rhino Capital, a real estate investment management firm.

Second-tier cities in the midwest, centre and southeast of the US including Indianapolis, San Antonio, Cincinnati, Kansas city and Houston, offer good investment opportunities, he added.

Middle East sovereign wealth funds and investment firms from the region have been actively investing in the US real estate sector for many years because of attractive returns.

Earlier this year, Bahrain-based alternative asset manager Investcorp invested $164 million (Dh602.4m) to acquire two properties in the US to boost its portfolio of real estate investments in the country. In November, the Bahraini company, which counts Mubadala Investment Company as its biggest shareholder also bought a portfolio of 126 industrial properties in the US for $800m.

Gulf Islamic Investments (GII), the UAE based investment manager also acquired a commercial property in upstate New York, increasing the value of its real estate portfolio in the US to more than $230m.

“We are specifically interested in mid-tier class b properties in multi-family segment,” Mr Russ added.

“With offices, corporate tenants will continue to require office space despite new social distancing guidelines. In industrial we are optimistic about the distribution, logistics side of the Amazon effect, which is having a negative impact on the retail but positive impact on logistics side of industrial properties.”

Abu Dhabi Investment Authority (Adia), the sovereign wealth fund of the emirate, has investments in the US property market. Last year, it bought the remaining 25 per cent stake in 330 Madison Avenue from Vornado Realty Trust, gaining full ownership of the Manhattan property.

Investment in the US property and real estate market has become more attractive amid the pandemic. Properties in hospitality sector are badly hit due to coronavirus pandemic with 30 to 35 per cent of urban US hotels estimated to never re-open, according to Mr Russ.

“Hotels have been incredibly hard hit. Recovery likely to take several years and will depend on recovery of other sectors like travel.”

Last month US based Hyatt Hotels Corporation decided to lay off 1,300 employees to cut costs. It also decided to close some properties due to lack of demand.

In March, GII co-founder and GCC chief executive, Mohammed Al-Hassan said his investment firm "has great confidence in the US market given the attractive risk spread, strong liquidity and transparent business environment.”