Chinese seen cooling on foreign property

Still, mainland investors are looking beyond global city gateways for real estate assets and starting to embrace joint ventures and partnerships, says Jones Lang LaSalle.
Chinese seen cooling on foreign property

The growth rate of Chinese investment in international real estate will fall significantly year-on-year in 2014, predicts property services firm Jones Lang LaSalle (JLL).

While Chinese investors doubled their investment into overseas property to $11.3 billion last year from 2012, the firm forecasts the rate of increase will slow to 33% in 2014.

In the US, New York's Manhattan attracted the lion's share, $3.4 billion, of Chinese investment last year. Then came Los Angeles ($780 million), Houston ($369), Chicago ($365 million) and New York City boroughs ($337 million).

"New sources of capital, including the Chinese, tend to target the biggest, most liquid cities in the world as their initial invstment destinations," said David Green Morgan, capital markets research director at JLL Global.

Office assets attracted 67% of Chinese investment in US property last year, while developments came second (14%) and apartments and hotels joint third (9% each).

Chinese developers are also increasingly looking to do joint ventures, added JLL. For example, China Cinda and US group Zeller last year partnered to make an investment of $302 million in a Chicago office building.

Meanwhile, JLL forecast that Chinese buyers will account for 16% of international buyers of US residential properties this year, up from 12% in 2013 and 2012. The mean purchase price of residential property last year was $591,000, with 75% of transactions made in cash.

The firm said the influx of Chinese money into residential property is likely to drive developers to adapt designs to the unique preferences of Chinese buyers. Chinese prefer residential properties in California, Washington DC and New York.

As an example of acitivity, JLL pointed to a construction boom in downtown Los Angeles, which is now being led by Chinese developers. Shanghai-based Greenland is building five high-rise towers there, including a hotel and an apartment complex, for a total investment of $1 billion.

Also last year, Beijing-based Oceanwide Real Estate acquired a site at Figueroa Central in LA, which it will turn into a residential and hotel development, for a total investment of $500 million.

“We expect foreign capital to play a significant role in the transformation of the [LA] market into a vibrant 24-hour centre,” said Micheal Zietsman, managing director in the capital markets group for Los Angeles at JLL.

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