Foreign cash bolsters Manhattan market.

Signs of an economic recovery were bolstered last week when the Association of Foreign Investors in Real Estate announced foreign investment in U.S. real estate rose by 59% in 2003 and is expected to increase by another 11.9% this year.

Once written off the leading investment marketplace list in the early 1990s, New York finished second only to Washington, D.C. as the second most popular city for foreign real estate investment.

The sharp rebound is in marked contrast to the 2002 drop in foreign investment by about 10 percent.

Steve Callahan, a partner in the real estate division of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo EC., said the boost can be attributed to the nation's economic recovery.

"I think the U.S. is clearly in a recovery and some of the European economies have lagged behind the U.S. in terms of their recoveries," Callahan said. "The overall economic terms of the U.S. have been on the rebound."

Despite a drop in the value of the dollar, Callahan said the American retail sector remains strong and significantly ahead of its European counterparts.

"(The Europeans) view the retail sector as being undervalued there," he said.

Jim Fetgatter, chief executive of AFIRE, which is headquartered in Washington, D.C., said the country had a resurgence of Australian investors. Although the capitalists from Down Under focus more on the Los Angeles area--probably because it's closer to Australia, Fetgatter said--their investments are still, in general, widespread.

In New York, many major real estate investors are German, Fetgatter said.

"What's happening in New York is that you're having a lot of German banks move in," he said. "There tends to be more of a mass of foreigners there. Even though they deal nationwide, I think they will bolster New York. They base themselves in New York."

But the District still tops the list thanks to the appeal of owning property in the nation's capital, limited space and the focus on the war on terrorism. In Washington, local law states that no building can top the height of the Capitol.

Plus, Callahan added, "the government always seems to generate additional jobs in both the private and public sector. The demand seems to ride out the economic downturn."

Still, insiders said, New York has stood up well in the face of the recent recession.

"While New York may not be immune from global synchronized recession, like cities such as Washington and Paris, it is pretty resistant," said Barden Gale, managing director of CIO Real Estate, ABP Investments, U.S., Inc. "It's the financial capital of the world, a gateway city, not only to the U.S., but for global commerce, and it is very accommodating to foreigners. It's a 24hour city; you can find your local bank doing business here."

And according to Arthur Margon, principal of Rosen Consulting Group in Manhattan, the jobs lost in Manhattan during the recession are now starting to be filled again.

"Those companies are now starting to hire back," he said.

According to the AFIRE survey, the U.S. garnered 60% of the vote as the most stable and secure country for real estate investment. Canada and France tied for second place with 9.4%.

The U.S. also out-distanced Japan, in second place, as having the best opportunity for capital appreciation, garnering 54% of the vote. Survey respondents also said that on average, North American real estate comprises 50% of foreign investors' global real estate portfolios.