The District is slipping down the ranks for foreign investors in real estate, but looks can be deceiving: we're as profitable as ever.

It's our image that's dropping, down from the No. 1 city in the US and No. 2 in the world in 2009, according to the Association of Foreign Investors in Real Estate’s 2014 member survey. DC is now the No. 15 city in the world and No. 5 in the US, behind New York (No. 1 on both lists), San Francisco, Houston and LA. The cause: squeamishness from sequestration and budget cuts, coupled with a vacancy rate that just won’t go down. “That’s scared them a little bit,” AFIRE CEO Jim Fetgatter (pictured) says. While just seven of the 731 properties purchased by foreign investors in Q1 were in DC, according to Colliers International, the District is just behind New York in terms of total dollars spent, with $1.66B. "These are really expensive properties, these are high-end office buildings," Colliers research director Pete Culliney tells us. "Manhattan building value is, on a per building basis, lower than DC."

“Our members have downgraded the suitability of DC the last three years,” Jim says. That’s not to say money isn’t flowing in. The largest PSF purchase in DC history—PNC Place (below), a $1,075 PSF and $392M sale—was last year, funded partly by Norway’s Norges Bank. Despite DC’s ominous forecast, foreign investment is exploding nationwide. Colliers reports foreign investment in real estate doubled in Q1 2015 over 2014, up to $22.1B. Traditionally, the biggest foreign investor in US real estate is Canada, whose institutions don’t have quite the opportunities in their own country they do in the States, Georgetown professor and director of the Steer Center for Global Real Estate Matthew Cypher (shown below) says.

More importantly, the US economy is the safest in the world, and large real estate properties in a dense urban area are among the safest investments there are. Developing and developed countries love having their money parked in a gleaming downtown building, Matt says, like Stafford Place II in Ballston, above, bought this month by German-backed Jamestown for $90M. Still, “it’s very hard to tell a good story about DC,” he adds.

The most active foreign investors in DC are not Canadian and Chinese groups, the two most prolific countries nationally. Instead, Norges, Jamestown, Alony Hetz (Israel) and Mirae Asset Financial (Korea, purchasers of the $700k PSF 1750 K St this week) are the area's top four investors over the past 24 months, according to RCA data. Kuwait's sovereign wealth fund was No. 8. China and Canada didn't even crack the top 20 investing entities. The moral of the story: Foreign money isn’t drying up in DC anytime soon, but DC is now ranked behind cities like Madrid and Houston, and it's reflected in those investing. At the end of the day, the federal government will go up and down, Pete says, but "that show’s not leaving town."