Foreign real estate investors are growing increasingly optimistic that the U.S. commercial real estate market will rebound in the second half of 2010.

According to a recent survey by the Association of Foreign Investors in Real Estate (AFIRE), which polled the organization’s 200 members, a majority of respondents expect to up their investments in the second half of this year in anticipation of a rebound next year.

German debt and equity firms will likely lead the charge. Helaba and West Deutsche have been actively lending already this year, and German equity firms such as SEB, Allianz, and Union Investment are poised to be some of the biggest foreign financiers over the next year.

“The Germans have always been very prolific investors, but in the last couple of years it’s been the Middle Eastern investors, and in previous years, Australia, who were the biggest investors,” says Jim Fetgatter, CEO of AFIRE. “But the Australians have dropped off, and the Middle East has been very quiet, so the Germans have been the only game in town.”

The survey found that little investment activity has occurred year-to-date: A full 75 percent of respondents hadn’t invested anything this year, which is no surprise. But more than 66 percent say they expect to be active in the second half of the year, with debt providers aiming to invest three times more than their current investment levels and equity investors expecting to place seven times more than year-to-date activity.

In all, about a third of the respondents said they were more optimistic in their investment projections than they were at the beginning of 2009. “We feel, to a certain extent, that we’ve seen the bottom, that it probably won’t get much worse than this,” Fetgatter says. “In January, nobody knew where the bottom would be; we felt like we were in a freefall. Now, the freefall has stopped.”

The main indicators behind this optimism were the slowing of unemployment growth and a stabilization of the stock market, relative to the early days of 2009. Interestingly, foreign investors are increasingly eyeing Washington, D.C., as the first market to recover. Twice as many respondents chose D.C. as their city of choice over New York City, mainly driven by expected employment growth in the district.

Respondents also believed that the office sector would recover first, followed by the multifamily industry. In an AFIRE survey six months ago, the opposite was true, but many foreign investors see office properties re-pricing more quickly than multifamily properties, and the decline in multifamily fundamentals this year has lessened the sector’s desirability.

In some ways, the multifamily industry hasn’t attracted as much foreign capital as its relative stability would suggest. This is mainly due to a lack of understanding of the multifamily market by many foreign investors. The multifamily industry can be very heavily regulated in other parts of the world, and renter profiles are drastically different in many European countries, where residents tend to stay in the same unit for long periods of time.

“Multifamily has been rising in popularity as they understand the market and the product better,” Fetgatter explains. “But with some of the re-pricing that has gone on in the office sector, and the fact that domestic private equity funds have been out of the market, they feel this is an opportunity to go back and pick up some office.”