Chinese investment in U.S. commercial real estate slowed in 2017 following the imposition of capital controls, according to Cushman & Wakefield. Cushman & Wakefield estimates that Chinese investors deployed $7.3 billion into commercial real estate acquisitions during 2017, a 55 percent decrease from 2016. As a result, China fell behind both Canada and Singapore in the ranking of largest sources of foreign capital in U.S. commercial real estate transactions.
In addition, according to the Rhodium Group, overall Foreign Direct Investment (FDI) flows from China into the United States fell 35 percent in 2017 to $29 billion.
Megadeals and hotel acquisition volume experienced the greatest declines. In March, the Chinese government further clarified capital controls under which investments in real estate and hospitality assets are classed as restricted, but not prohibited.
Investments were concentrated in five U.S. markets, which include New York, San Francisco, Los Angeles, Chicago and Seattle. However, New York and San Francisco account for two-thirds of Chinese investments.
Non-institutional players dominated acquisition activity in 2017 as well, with sovereign wealth funds and insurers, in particular, becoming less active.
Demand for office and industrial properties remained relatively supported in 2017 in contrast to hotel, development sites and multifamily.
Looking past the positive years of 2015 and 2016, trend acquisition volumes are rising across property types, the report stated.
While Chinese investment in U.S. CRE declined, global outbound investment set a new record, with the United Kingdom a prime beneficiary.
Cushman & Wakefield’s outlook for 2018 is that restrictions will continue to weigh on overall transaction activity, but U.S. economic growth and the liquidity, safety and diversification benefits of its CRE markets will continue to attract Chinese capital. Investment activity will favor deals most likely to receive state approval, including logistics entities and properties, R&D facilities, as well as student and senior housing.
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