Despite signs of a slow-down in the Chinese economy, investors from the country are continuing to target the US commercial property market. Chinese interest in US assets began with a trickle of purchases two years ago but, recently, this has developed into a flood of billion dollar deals that shows no sign of receding in the near future.
In the past few weeks alone there have been several big deals in New York involving Chinese investors. These include the purchase of the General Motors building by a partnership led by business magnate Zhang Xin and the announcement by a major Chinese developer that it plans to build a luxury hotel in Manhattan. There has also been a flurry of hotel purchases in California.
But the Chinese are not restricting themselves to headline grabbing deals in prime locations. Some of the purchases have been relatively small amid signs that demand for office, retail and industrial property is improving.
In addition to buying property, the Chinese have emerged as major financiers. The state-owned Bank of China is now the biggest overseas lender in commercial real estate deals in the US, ahead of the traditional European banks which have restricted lending since the global financial crisis.
Furthermore, analysts believe that the levels of direct Chinese investment are dwarfed by the money flowing in through private investments and real estate funds. For example, the country’s leading wealth fund, the China Investment Corporation, has made direct purchases of US assets but has also invested heavily in large private investment funds.
At the moment the Chinese government is encouraging US investment and, in some cases, actively helping to finance deals but some analysts fear there could be a retreat should the domestic economic conditions worsen.
However, there appears to be little prospect of this in the short term. As one industry insider told the New York Times; “They’re just getting started. There’s just been some incredible wealth creation there.”
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