Commercial real estate investment reached US$33.7billion from June 2008-June 2014, led by the United States, Britain and Hong Kong, says leading international agent, Cushman & Wakefield
Chinese investment in overseas commercial property is ‘booming’, growing 200-fold in the last six years, says top agent, Cushman & Wakefield.
Chinese outbound investment in commercial property reached US$33.7billion from June 2008-June 2014, growing more than 200-fold, says the investment white paper, China’s Outbound Boom: The Rise of Chinese Investment in Global Real Estate.
The United States is the top destination for investment from mainland China, followed by the UK, the first choice for Chinese real estate investors in Europe, with London alone taking 62.7% of the European total, and Hong Kong.
Ted Li, National Director of Capital Markets, China, Cushman & Wakefield, says, “Chinese investors prefer developed and mature markets in Asia, North America and Europe. The U.S. is the top destination, following by Britain, Hong Kong, Singapore, Australia, Malaysia, Japan and Brazil.
“Southeast Asia is a favourite location as well, due to its proximity to China and the strong presence of ethnic Chinese communities.
“In Singapore, Chinese investors prefer to invest in offices, whereas in Malaysia, land development is the preferred vehicle. Many Chinese developers view the Iskandar Malaysia development zone as having huge potential for growth given its close proximity to Singapore.”
Domestic restrictions and cooling market conditions in the Chinese real estate sector are pushing many investors to diversify to developed countries where signs of economic recovery and the prospect of asset appreciation promise more attractive returns, explains Mark Suchy, Director of Investment & Capital Markets, East China, Cushman & Wakefield.
“Positive Chinese policy reform, the strengthening of the renminbi and the desire of Chinese firms to internationalize are further fuelling these capital outflows.”
A variety of investors – including large private developers, state-owned banks and insurance firms, sovereign wealth funds and high-net-worth individuals – are jumping into foreign property markets.
Cushman & Wakefield analysis shows that while state-owned enterprises and private firms each contributed around 50% of the total value of outbound real estate investment from 2008 to June 2014, private enterprises and individual investors accounted for a larger share of the number of deals.
From 2008 to June 2014, office buildings are by far the preferred property type, accounting for over 48% of total aggregate investment to date. Office investments experienced a spike in 2013, reaching US$8.4billion – greater than the sum total for all other asset classes of US$7.4billion that year. In 2014 to date, office investments also led the way at US$2.8billion, with development sites (US$1.7billion) trailing behind.
China’s investments in United States real estate are concentrated in gateway cities in the eastern and western coastal areas as well as the Great Lakes region, but investors are increasingly tending to diversify their asset choices and spread their investments across the country.
In the aftermath of the global financial crisis, European Union leaders are looking abroad for foreign direct investment to create job opportunities and stimulate economic recovery and over the past couple of years, the European real estate sector has emerged as a popular target for Chinese investors.
“Chinese investors face an array of challenges in going global,” says James Shepherd, Executive Director, Head of Research, Greater China. “These take the form of government controls on capital flows; talent shortages; differences in corporate and management cultures; and unfamiliarity with foreign legal and regulatory environments, including sometimes-daunting tax laws.”
Nevertheless, Cushman & Wakefield believes that Chinese outbound investment will continue its growth trend, as wealthy individuals and capital-rich firms in China look to further diversify and expand their global presence and sophistication.
Cushman & Wakefield is the world’s largest privately-held commercial real estate services firm, with 250 offices in 60 countries, employing more than 16,000 professionals.
In Greater China, Cushman & Wakefield has offices in Beijing, Shanghai, Chengdu, Guangzhou, Shenzhen, Hong Kong and Taipei.
By Adrian Bishop, Editor, OPP Connect