China Investment in U.S. CRE Goes Beyond Gateway Markets

Michael Gerard is Marketing Director at GRS Group

Michael Gerard is Marketing Director at GRS Group

A gateway market in the United States is debatable. New York City, the San Francisco area, parts of Los Angeles and Washington, D.C., are where foreign investors have typically liked to place their money.

Areas of Texas have now been considered gateway cities, and now investors in China are putting some major money into Dallas commercial real estate. There is reportedly billions of dollars hitting the office, apartment and single-family home real estate sectors by various investors from the world’s largest country. Nearly $200 million of China-based investment has hit the Dallas apartment market in the last 90 days, according to estimates from ARA. Skyscrapers and hotels in the North Texas market are also gaining a lot of attention because they seem affordable compared to the New York and California markets, and it’s assumed that better yields can be attracted.

Even firms like Zillow and Windham Realty are marketing to potential investors in China. In the case of Windham, suburbs of Detroit, as well as luxury properties in San Diego and Fort Meyers, Fla., are currently heavily advertised.

Gateway markets aren’t ignored, though. China-based Anbang Insurance Group bought the famous Waldorf Astoria hotel, in Manhattan, for just under $2 billion.

The reasons for all of this activity include a slackening pace of the Chinese economy, the stability of the overall economic environment in the United States, and the perceived lack of perception of business deals in China, which has apparently been marred by corruption disputes.

China’s economic problems have actually helped out U.S. commercial real estate. As of late September, Chinese investors had spent $5.8 billion on commercial real estate assets in the United States from the prior 12 months, according to Real Capital Analytics. The top five markets were Manhattan; Los Angeles; Chicago; Houston; and San Jose, Calif. Luxury hotels, such as the Waldorf, performed among the best in these markets, as well as multifamily products. In New York City, Chinese buyers were nine percent of the total transactions in the total area.

Part of the reason that the Fed has been comfortable to rise interest rates here has to do with a perceived lack of lack of economic growth in China, which is forecasting a 6.9-percent GDP hike for all of 2015 that it posted in the first three months of the year. This is ironic, considering that plenty of nations would boast those numbers, but it is low compared to its prior growth of more than seven percent over the last several years.

However, Chinese real estate investment in the United States only accounts for three percent of its global real estate spending. Do you think China investment will increase?

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