• Alexander Liu-Middleton

Global investors in the Chinese real estate market

OVERSEAS investors are increasing their presence in China's commercial real estate market, taking benefits from the negative drive that is squeezing the country's businesses.

Foreign companies are poised to sustain a resurgence that last year sent their acquisitions to a record US$9 billion countrywide and accounted for just over 50% of all transactions in Shanghai.

The Blackstone Group and Singaporean developer CapitaLand are chief among those leading the advance. CapitaLand and Singapore sovereign wealth fund GIC spent US$1.8 billion on Shanghai's highest twin towers in the biggest acquisition of last year.

The increase arises just as some of China's largest private multinationals - like the beleaguered HNA Group - are toning down external property purchasing sprees. In some cases, they are also selling domestic Chinese real estate. Foreign buyers are assisted by a weak yuan that makes acquisitions more inexpensive and tight financial conditions that mean many Chinese companies are more likely to be sellers than purchasers.

The financial power available for non-nationals includes the US$15.6 billion raised for Asian property private equity funds in 2018, according to market research firm Preqin. Foreign businesses purchased 31% of commercial property in China last year. This information is garnered from CBRE data for deals in excess of US$10 million.

Foreign businesses may account for as much as 40% of sales in Shanghai and Beijing combined in 2019, (according to Colliers International Group). Local firms face constraints including rule changes in late 2017 that made it harder for property private equity funds to raise money.

Cities such as Chongqing, Chengdu, Hangzhou, Nanjing and Wuhan are also attracting interest because of the prospect of rising incomes, according to Sam Xie, CBRE Group's head of research in China.

David McMullan of China Consulting Solutions comments “it’s undoubtedly a good time to invest capital in Chinese commercial property but I would advise that a potential buyer should look in a crystal ball and try to see the future as rule changes at a government level have been the downfall of many the Chinese market investor. Make sure there are no government department meetings in the near future that could affect your purchase negatively, if you want some market research done on these projects contact us.”

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