Chinese outbound investment by volume is set to hit a record high in 2016: already the US$23.5billion of investment sales have been recorded over the first eight months, nearing the US$25.7billion invested for the full year in 2015.
In response to the Cushman & Wakefield Chinese Outbound Investment Q3 findings, Ms. Xinyi McKinny, Senior Managing Director, China Direct Investment, San Francisco Bay Area, said:
“Cushman & Wakefield / DTZ’s Q3 Chinese outbound investment report shows outbound investment will continue to grow. The G20 Hangzhou summit in September 2016 agreed the “Guiding Principles for Global Investment Policymaking”, which will encourage Chinese outbound investment.”
“With pressure from a slowing Chinese economy, the attraction of overseas investment, strength of Chinese enterprises and the support of the policy, “going out” becomes a general trend for Chinese enterprises, especially for the real estate industry. “Going out” is not only a choice to diversify investment risks, but also can generate higher return since overseas investment could utilize higher leverage,” Ms. McKinny said.
“Culturally, Chinese investors tend to hold assets for a longer period of time. Even though the Cap rate is very low in San Francisco and Los Angeles currently, the investors still believe they can benefit from a long-term investment strategy in these markets.”
According to McKinny, Chinese investors and developers from Beijing, Shanghai and Shenzhen have demonstrated their enthusiasm for doing real estate investment and/or development in the US, especially in LA and San Francisco.
“No surprise, LA is the ideal location. LA has a large Chinese population, the most frequent flights between China and the United States, and the deepest cooperation with the Chinese economy. Of course, LA is also a very popular place for tourism and living. San Francisco has its set of challenges both physically and politically due to limited space and robust legislative requirements,” Ms. McKinny said.
Currently large Chinese development projects are leading the transformation of the downtown LA skyline, for example, Greenland Metropolis, Oceanwide Plaza and Hazens LA Center. McKinny says these are typical Chinese trophy developments with hotels, condominiums and shopping complexes.
“In coming decades, the Chinese development will focus more on strategic asset allocation, with increase in office buildings, while hotel and residential developments reach new peaks,” Ms. McKinny added.
Mr. James Shepherd, Cushman & Wakefield Managing Director, Research, Greater China, said, “Another driver for overseas capital deployment is concern over potential RMB depreciation along with record low borrowing rates in mature markets such as the U.S. and U.K.”
The full report is available HERE.