KPMG: Chinese Investors Looking Beyond Gateways

Chinese investors show strong interest in U.S. commercial real estate, reported KPMG LLP, New York.

The consulting firm estimated that Chinese investment in U.S. commercial real estate exceeded $4 billion last year. 

“The U.S. market is very attractive to Chinese investors as they look to expand their global operations, diversify their portfolios by adding U.S. assets and establish information exchanges with U.S. developers,” said KPMG U.S. Real Estate Funds Leader Phil Marra. “While much of the investment has been focused in U.S. coastal gateway cities, where assets are considered most liquid, Chinese investors are starting to expand into other markets as they seek higher yields and diversification.”

KPMG’s China Inbound Investing in U.S. Real Estate report examined market dynamics in the United States’ six most active real estate markets, New York, Los Angeles, San Francisco, Washington, D.C., Chicago and Dallas. It predicted that the overall U.S. real estate market should see “record-setting” growth in the next two years due to a solid domestic economy, low interest rates worldwide and increasing demand from both U.S. and global investors seeking yield.

CBRE, Los Angeles, noted that the combination of a favorable exchange rate and economic growth has made the U.S. a leading target for Middle East-based investors as well. Mid-East investors purchased nearly $10 billion in U.S. CRE in 2015, a “significant” increase, CBRE said.

“The destinations of investment flows from the Middle East are becoming more diverse and are no longer solely concentrated on London and New York City,” said CBRE Capital Markets Global President Chris Ludeman. “We expect investment flows from the Middle East to be substantial for the near future–interest in the hotel sector will remain strong, while the industrial and logistics sector will attract an increased share of capital.”

Roger Power, KPMG U.S.-China Real Estate Initiative Leader Roger Power said Chinese investors continue to show a strong appetite in markets with strong real estate fundamentals including Dallas and Seattle. “Finding a strong local development partner or establishing a local presence with an experienced local real estate team are critical to achieving desired returns,” he said.

KPMG noted that the Chinese Insurance Regulatory Commission recently encouraged Chinese insurance companies to increase overseas investment by allowing them to invest up to 15 percent of their assets outside the country. In addition, China’s Qualified Domestic Individual Investor program further offers a way for China’s middle-class and high-net-worth individuals to invest overseas.