Chinese Invested billions into new development of US Real Estate

Date: April 24, 2017
Author: Julia

Chinese have invested an amount of $110 billion in the US real estate. The amount will get double in the upcoming five years. The Nationals have shown a keen interest in the US property and have become the largest foreign buyers after investing billions in the new development for safe offshore assets. Instead of buying the existing commercial properties, Chinese made a move in a site of San Francisco, which reflects a new development.

From the last eight years, the local developers tried and made reasonable efforts to equip the waterfront land of 42 acres in the south of downtown San Francisco. Recently the Group of Chinese developers and the Greenland Holding Group, Ping, And Trust has made a great move by paying the investors $171 million for the San Francisco Bay.

The investment made by Chinese in property has undoubtedly inflated prices in many other countries most probably in Australia and UK. We cannot contradict the fact that China is different and one of a unique country because of making a high investment, especially in the real estate categories. However, a unique entry will be done primarily for the domestic purchases.

Moreover, the new owners have planned to invest more than $1 billion in the development aiming to establish a flourishing industry area for the biotechnology companies. The Chief executive of the venture, Taotao Song said: “the experts of our venture are well aware and confident about the research and development market as well as the local market.”

In the last years, Chinese have invested money into the highest profile development especially in the US while in many other cities, they have invested in the underdeveloped projects including Boston, LA, Miami, Chicago, and New York.

The Chinese companies keep diversifying even outside of China. Their flow of cash is constant which helps to build the confidence of the fading local real estate markets as told by real estate executives. The anti-corruption campaign started by the President Xi-Jinping`s also compelled the investors of China to seek projects in abroad as a way to evade against the possible crackdown on the industry at home. Most of the officials have blocked property sales as well as detained the executive's various companies during investigations.

During 2016, China completed the commercial property purchases in the US by the investors, which exceed to $5 billion. Many deals have not finished, despite that Chinese investors committed to invest $12.9 billion in 2017 while the rate was $14 billion in 2015. However, the rate of investment does appear to be slow as compared to the last two years. According to the real capital, the investing amount was $3.4 billion in 2014.

Let's take a look at the investment property which includes the Manhattan 1285 Avenue office towers in America in which partial share has been bought by China Life Insurance Corporation while the deal of Anbang Insurance Group Co. has not been closed which seeks to acquire Strategic Hotels and Resorts Incorporation with $6.5 billion.  Anbang also led a terminated purchase of $14 billion of Starwood Hotels and Resorts Worldwide Incorporation.

The Chinese investors prefer to stanch or invest the money out of China. Their focus is to develop new buildings that offer the real estate investors to get high returns. This also limits the risk associated to buy the existing buildings.

Many of the investors prefer and seek the development opportunities as told by the Stephen Collins who supervises the global capital markets group at JLL, which provides the real estate investment services. It is true that the Chinese companies own experience with the development projects even in China or worldwide. They believe that they can easily make money by buying a reliable land, building better and then selling it in a higher amount instead of buying and renovating an existing tower.

There are many projects, which are controlled by Chinese companies including a development to create a third tallest, tower in Chicago; the planned second tallest tower is in San Francisco while many other related giant projects would be in downtown Los Angeles. The planned skyscraper developed by the Chinese Gemdale Corporation in downtown Boston was also a successful project.

During the start of this month, Chinese have made a flashiest investment by joining the New York-based corporation Extel development to construct $3 billion park tower. Even the skyscraper condominium will also increase 300 feet, and the Empire State Building will become one of the tallest towers for apartments in the US.

Chinese are wise enough to take care of the biggest risk that is timing. They are doing wonders in the economic cycle. Chinese will surely double their amount in the upcoming years despite having ongoing projects. Their primary focus recently is the Manhattan luxury market while Greenland Group has made the $1 billion investment for the cluster of towers that will be built in LA named as Metropolis.