The Real Deal New York

Chinese investment in US real estate expected to slide: report

Asia Society found Chinese invested $110B-plus in American properties from 2010-2015

May 16, 2016 07:30AM
By E.B. Solomont

chinainvestmentchart

With China’s domestic economy faltering, investment in U.S. and New York real estate is expected to slow over the next two years, according to a new report from the Asia Society.

The spigot won’t be shut off altogether: Some $58 billion is still expected to be deployed into commercial real estate in the U.S. between 2016 and 2020, according to the report’s authors. But they spoke of an 18- to 24-month “hiatus” that’s already underway as the Chinese government tries to right its economy.

The Chinese government has been taking longer to approve investments abroad in recent months, signaling an effort to staunch the flow of funds overseas, the authors wrote.

“We don’t see that as stopping investment abroad, and in fact, it hasn’t,” said Arthur Margon, a partner at Rosen Consulting Group, which was commissioned by the Asia Society to produce the report. “They’re trying to get righted while they defend their currency and fight inflation, so they’re changing the short-term strategy.”

Overall, Chinese investment in U.S. commercial real estate reached $8.5 billion in 2015, a record high and a 70 percent jump from 2010, according to the 111-page report, released on Monday. Compared to other countries, China ranked No. 3 among foreign investors in commercial real estate around the U.S. in 2015, behind Canada ($24.6 billion worth of investment) and Singapore ($14.6 billion).

Chinese firms set the table in New York, representing 56 percent of transaction volume between 2010 and 2015, including $9.56 billion in commercial real estate during the five-year period. High-profile plays include Anbang Insurance’s $1.95 billion acquisition of the Waldorf-Astoria Hotel, as well as Greenland’s 70 percent ownership stake in Pacific Park in Brooklyn.

“New York has been a major focus and it’s the largest recipient of Chinese investment in commercial real estate,” said Margon, citing the stability of real estate here. “They’ve been very active in just amassing properties across the spectrum.”

Prominent New York real estate players have been divided on the fate of Chinese investment in recent months. Earlier this year, Related Companies CEO Jeff Blau said developers “should be looking for other sources of capital over the next few years.”

Last week, panelists at The Real Deal’s New York Real Estate Showcase and Forum said they believe Chinese buyers are more eager than ever to park their money in a safe haven. “You may see a different economy in China, but the Chinese are still buying here,” said Elizabeth Ann Stribling-Kivlan, president of residential brokerage Stribling & Associates.

On the residential side, Chinese buyers outpaced investors from all other countries, purchasing $28.6 billion worth of property in 2015 and besting Canada’s $11.2 billion and India’s $7.9 billion.

Despite the buzz surrounding Chinese buyers of New York City condos, the vast majority of residential investors have scooped up property in California, which accounts for one-third of such investment in the U.S., compared to New York’s 7 percent. Deep-pocketed investors still flock to New York, where they can buy and sell condos with relative ease, Margon said.

Other findings by the Asia Society include:

  • $93 billion in residential investment between 2010 and 2015;
  • $17.1 billion in commercial real estate investment between 2010 and 2015;
  • $9.5 billion investment via the EB-5 visa program;
  • a $207.9 billion position in U.S. government-backed mortgage bonds; and
  • $8 billion in loans made by Chinese banks for commercial real estate projects in the U.S.

Correction: The subhead misstated the total investment in U.S. real estate; it’s believed to be $110 billion, not $110 million as initially reported.

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