Chinese Investment in U.S. CRE Plummets
Chinese investment in U.S. commercial real estate fell 55 percent last year–from $16.2 billion in 2016 to just $7.3 billion in 2017–reported Cushman & Wakefield, New York.
The firm’s China – U.S. Inbound Investment Capital Watch report noted many analysts speculated that Chinese investments in U.S. CRE would drop when China’s State Council implemented a framework regulating outbound investments in August 2017.
The volume of $1 billion-plus deals fell 75 per cent year-over-year in 2017, Cushman said. By contrast, the total volume of deals under $250 million fell only 12 per cent. The investment drop–largely a result of stricter capital controls and regulations–caused China to fall from the largest foreign investor in U.S. CRE to the third largest.
“One of our main strengths has been the large deal transaction business and for years a significant part of it was meeting the insatiable appetite of Chinese investors for large trophy assets in the U.S.,” said Cushman & Wakefield Capital Markets Chairman Doug Harmon. But he noted as Chinese appetite for U.S. real estate has waned, new entrants from around the globe have emerged to take its place, he said, noting Canada re-assumed the No. 1 spot and Singapore became the second-largest foreign investor last year.
“Although Chinese investor activity has been dampened due to government policies on currency export, we believe that the acceleration of the U.S. economy will continue to provide international investors with a compelling investment opportunity,” said Cushman & Wakefield Executive Managing Director of Capital Markets Janice Stanton. “And while New York City may witness some isolated Chinese dispositions in 2018 for political reasons, we believe that appetite will be quickly backfilled by other international players as New York remains a top destination for global capital.”
China achieved two spots among the top 10 deals last year, both in Manhattan. The country continues to target New York, San Francisco, Los Angeles, Chicago and Seattle for U.S. investment, the report said. More than three-quarters of its capital was deployed into those five markets and New York and San Francisco alone received two-thirds of every Chinese dollar.
Hotel acquisitions accounted for most of the overall decline in Chinese investment, falling 84 percent year-over-year in 2017. But Cushman & Wakefield Americas Head of Capital Markets Research David Bitner said the report indicated a “healthy” interest in industrial and office assets. “Industrial volumes remain elevated compared to pre-2015 levels and we expect them to increase further,” he said. “Office overall received 50 percent of all Chinese capital in 2017.”
