Chinese outbound property investment increased by 25 percent to US$2.1 billion last year according to the latest figures from JLL, but while Chinese institutional investors are still major buyers of commercial property, the real growth has been in the purchase of residential land for development.
Although commercial investment was flat over the first quarter of the year, Chinese investors still spent more than US$1 billion outside of the country. The U.S. and Australian real estate markets attracted most of this capital from China in Q1 — the United States with USD 732 million and Australia with US$400 million.
While the office sector continues to dominate as the preferred asset class among Chinese commercial real estate investors that are active overseas, there is an increasing interest in residential development, as demonstrated by Greenland’s recent purchases in London, Los Angeles and Sydney, as well as Country Garden’s first foray into the Australian market earlier in the year.
David Green-Morgan, Global Capital Markets Research Director at JLL, said: “As major Chinese residential developers look for opportunities overseas to counteract slower economic and price growth at home, the residential development investment is up 80 percent (from US$ 600 million to US$1.1 billion), with the United Kingdom, Australia and the United States seeing most of the investment.”
Greenland has been the most active of all Chinese residential developers with purchases of the Ram Brewery and Hertsmere House sites in London, together with a site in Los Angeles and Sydney. While Greenland pursued this strategy alone, a key component of Chinese investment in the first quarter of this year has been the use of partnerships and joint ventures. This was exemplified by a recent deal in Chicago where China Cinda joined with the U.S. group Zeller to buy an office building for US$302 million.
Chinese property developer Country Garden Australia Pty Ltd provides a further example of the trend with its first major investment in the Australian residential property market, purchasing a development site in Sydney’s north-west for AUD73 million.
While Chinese investment in overseas real estate continues to be spread across the globe, most of the deals in Q1 2014 take place in larger, gateway cities such as London, Sydney, Los Angeles and Chicago.
Darren Xia, Director of International Capital Group (ICG) at JLL China, noted: “We expect interest and activity from equity-rich Chinese investors in overseas real estate markets to continue to grow throughout the remainder of 2014 and, as a result, it is possible that the total volume of spend by Chinese investors on commercial real estate outside of China could pass the US$10 billion mark in 2014.”
Andrew Batt, International Group Editor of PropertyGuru Group, wrote this story. To contact him about this or other stories email andrew@propertyguru.com.sg
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