Asian Investors Pouring Billions Into US Markets
Asian investors are doubling down on global commercial real estate.
Asian investment contributed $27B during the first half of this year and is on track to break a record, according to CBRE research. Separate data from Cushman & Wakefield revealed Chinese outbound investment recorded over the last eight months reached $23.5B. Cushman & Wakefield expects Chinese investment to reach $35B by year’s end, outpacing the $25.7B recorded in 2015.
About $14B of Asian investment during the first half went toward the Americas, with New York, San Francisco and Chicago key target areas for outbound investment, reports CBRE. Asian investors put about $4.02B down in New York, followed by $1.4B in San Francisco and $1.3B in Chicago. Investors also put $4.01B in London and invested $2.12B in Hong Kong.
Asian investment will continue to flood into US markets for years to come. Outbound investment multiplied tenfold last year to $47B compared to $4.3B in 2009 when about 80% of Asian investors' capital went toward domestic markets. Those investors are only putting 47% toward domestic markets as of 2015, according to CBRE.
The number of portfolio transactions increased to 36% during the first six months of 2016, up from 29% during the first half of last year. Transactions over $500M accounted for 45% of the volume. Investors preferred office stock (47% of investment), followed by hotels (33%). Foreign investors are also keen to form JVs and partnerships with local developers or operators, reports CBRE.
New York is clearly becoming a top market, with some of the largest Chinese investment deals in the US, according to Cushman & Wakefield’s data. Earlier this year, China Life JV RXR bought 1285 Avenue of the Americas, above, for $1.6B; Hong Kong Monetary Authority put $1.2B (49% share) toward NY's Salesforce Tower; and China Investment Corp bought a 49% share for $700M of One New York Plaza. China Life also bought a $2B stake in Starwood Capital Group earlier this month.
San Francisco, Los Angeles Ideal For Asian Investors
The San Francisco Bay Area has gained significant interest from foreign investment, with several large deals occurring in Union Square, such as the $73M sale of 220 Post St, above, by a Taiwanese investor. San Jose also is experiencing increased interest from foreign investment.
CBRE Capital Markets, San Francisco, vice chairman Russell Ingrum says the Bay Area has been seeing a steady stream of Asian investors of late.
“While the high-profile acquisitions get most of the attention, we have been seeing Asian capital across the risk and size spectrum for the last few years,” Russell says. “There are more investors interested in buying here. This is definitely a secular shift and not just a temporary phenomenon.”
Investors and developers from Beijing, Shanghai and Shenzuan are particularly enthusiastic about Los Angeles and San Francisco, according to Cushman & Wakefield senior managing director, China Direct Investment, San Francisco Bay Area Xinyi McKinny, above with her dog. Even with the low cap rates in these markets, Chinese investors tend to be in it for the long haul and believe they can benefit in Los Angeles and San Francisco, she says.
“Los Angeles is an ideal location. It has a large Chinese population, the most frequent flights between China and the US and the deepest cooperation with the Chinese economy,” Xinyi says. “And, of course, Los Angeles is a very popular place for tourism and living.”
She says several Chinese development projects are transforming downtown LA, including Greenland Metropolis, Oceanwide Plaza, above, and Hazens LA Center. These are typical “trophy” developments with hotels, condos and a shopping complex, Xinyi says.