CBRE: Chinese Investors Dominate Outbound Real Estate

Chinese investors dominated outbound real estate investment in 2016, accounting for nearly half of total investment–with 47 percent or $28.2 billion–reported CBRE, Los Angeles.

Overall outbound investment activity by Asian investors remained “robust,” with institutional investors continuing to lead investment activity, contributing to six of the top 10 biggest outbound deals of the year, CBRE said.

“Chinese investors remain active in deploying capital offshore into global real estate assets,” said CBRE Global Capital Markets Executive Director Yvonne Siew. “Despite recent policies by the government restricting Chinese outbound investment, there continues to be a steady flow of Chinese capital overseas as investors seek to diversify their portfolios.”

Siew noted increased scrutiny on cross-border capital flows and “rigorous” Chinese government checks, which can lengthen the approval process. “Chinese outbound real estate investment may moderate, gathering at a more sustainable rate,” she said. “Instead of larger transactions, Chinese investors may simply opt for a higher number of smaller deals. Regardless, Chinese appetite for global real estate investment will remain solid but more cautious, with Chinese insurers and qualified Asset Managers being the active institutional investor class.”

CBRE reported that the U.S. remained the most favored destination for Asian capital for the second year. The U.S. drew 43 percent of outbound Asian investment, followed by the Europe-Middle East-Africa region at 27 percent. Asian investment within Asia grew from 21 percent to 23 percent of overall investment turnover, “which shows that Asian investors favored to keep more capital within their own region,” the report said. 

New York surpassed London as the top metropolitan destination for outbound investment in 2016, but it contributed to a smaller share than in 2015, CBRE said. The top five destinations–New York, London, Hong Kong, Seoul and Sydney–contributed to 37 percent of the overall total, down from 42 percent in 2015 and an indication that investment spread across more diverse destinations last year than the year before. 

“Asian investors are now showing more interest and seeking out assets in more diverse markets globally,” said CBRE Asia-Pacific Research Director Robert Fong. Compared to 2015, more capital was deployed to alternative gateway cities in search of attractively priced opportunities.” 

Fong noted that more places in continental Europe including France and the Netherlands as well as Chicago, San Francisco and Washington, D.C. and Vancouver, Canada are now on more investor radar screens. 

“There was a significant uptick of Japanese investment targeted mostly for the U.S.,” Fong said. “We expect Japan to step-up overseas investment in the year ahead as they are coming off a low base.” 

Fong said office remains Asian investors’ primary focus, but the hotel sector has grown more popular. “Gateway cities of London, New York and Hong Kong were the top three destinations for office investment,” he said. “Meanwhile, the hotel sector garnered more interest with U.S. hotel assets attracting significant international investment–the biggest transaction of the year was a hotel acquisition in the U.S. by a Chinese investor.”

Last year also saw growing interest in niche sectors including student housing and healthcare by experienced Asian investors, Fong said. It represented the first time that Asian investors focused on the student housing sector, with three major deals completed by Singaporean investors in 2016, he said.

“More investors are exploring opportunities outside conventional asset classes in search for higher yields and keeping in tune with demographic changes,” Fong said.