Chinese keep buying US real estate

Updated: 2013-11-08 12:58

By Michael Barris in New York (China Daily USA)

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Chinese investors will continue to pour money into US commercial real estate deals despite China's recent economic slowdown, according to a report.

"At the moment, we've seen no evidence - seen nothing that says there will be a slowdown (in deals)," said Steve Blank, senior resident fellow for the Urban Land Institute (ULI), during a question-and-answer session at the release of the ULI's "Emerging Trends in Real Estate" report in Chicago on Thursday.

"The people who have the capital and are interested in investing in the United States seem to be able to operate independently of the general economy," Blank said in reply to a question from China Daily at the presentation broadcast live on the Internet.

The study, jointly produced by ULI, a nonprofit research organization, and accounting firm PriceWaterhouseCoopers LLP, said the US real estate recovery will gain momentum in 2014, as investors shift their focus to secondary markets.

The report also kept San Francisco on top as a market to watch, but moved up Houston from number five to number two based on the city's investment and home building prospects. Miami, benefiting from South American investment, moved to eighth from 12th while Washington, the source of investor federal-government "fatigue", plummeted from 8th to 22nd, according to the report. New York slipped two places to number four amid growing concern that pricing is too high.

Based on interviews with more than 900 real estate executives, including developers, investors and financial firms, the report included "China's moderating growth" among headwinds facing the industry in 2014. Other problems are a "stubbornly high' unemployment rate, uncertainty over government regulation and fiscal policy, a likely increase in the cost of both equity and debt capital, and economic uncertainty in Europe.

Blank said that even as China's GDP growth rate has declined in the past two years to a single digit percentage from a double-digit figure, "we had increasing amounts of capital from Asia interested in investing in the United States".

Chinese investment in US and other overseas real-estate markets has grown as China's leadership maintains residential-property curbs aimed at holding down skyrocketing prices. Last month, Shanghai-based Fosun International - the investment firm headed by billionaire Guo Guangchang - agreed to pay $725 million for One Chase Manhattan Plaza, a high-profile 60-story office tower in New York's financial district. In June, a group led by real-estate tycoon Zhang Xin acquired a 40 percent stake in the most expensive US building - the General Motors office tower in midtown Manhattan.

In July, Shanghai-based Greenland Holdings Group acquired a downtown Los Angeles site for a $1 billion hotel-office-residential project. In February, Shenzhen's China Vanke Co announced a $620 million luxury high-rise condominium project in San Francisco with New York-based Tishman Speyer Properties LP.

The report sees investor demand for commercial real estate picking up along with the economy next year, even if interest rates rise.

"The steady economic recovery and job creation has created tailwinds that have propelled the commercial real estate market forward, and momentum of this recovery seems powerful enough to weather spikes in interest rates that may be inevitable," said Mitchell Roschelle, PwC's national real estate practice leader.

Commercial-property lenders are expected to ease restrictions imposed after the 2008 credit crisis, with a rise in financing seen for 2014. The commercial mortgage-backed securities market ranks at the top of the survey for expected change in availability, according to the report.

(China Daily USA 11/08/2013 page1)