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Investment in U.S. Real Estate By China Slows

Some Sales of U.S. Assets Came in First Half, a Trend CBRE Expects to Extend in Coming Months
September 5, 2018
The recent sale of New York-based Goldman Sachs' new European headquarters in London to National Pension Service of Korea underscores growing real estate investment in Europe by Asian investors.

China investors are slowing the acquisition of overseas commercial real estate and have begun selling, particularly in the U.S. and Europe, to improve balance sheets and to lock in profit for their early investment, according to a new report.

The dispositions in the first half of 2018 will probably extend into the coming months as some investors in China under financial strain seek to strengthen their balance sheets, reports Los Angeles-based real estate services provider CBRE.

Asian outbound capital deployment remains robust amid the recent slowdown of Chinese outbound real estate investment, with US$25.3 billion of activity in the first half of 2018 led by Singaporean capital, which accounted for 36 percent of the region’s total, reports CBRE.

Singaporean investors favored Europe as a location for portfolio diversification, investing US$3.4 billion into the region in the first half of 2018, CBRE said. Singaporean investors were also active in the U.S. logistics sector, spending around US$2.27 billion during the period.

Henry Chin, head of research, Asia Pacific at CBRE, the world's largest commercial real estate services firm, said that "overall, we anticipate that Singaporean, Korean and Hong Kong investors’ strong investment appetite, particularly in Europe and the U.S., will continue to be a key propellant of Asian outbound investment in the medium to long term."

London is still a preferred channel for Asian investors, accounting for 26 percent of the region’s total outflows, CBRE finds.

"Substantial funds flowed from both Hong Kong and Singapore into London to capitalize on the more favorable yields and longer rental periods presented by commercial properties that are unattainable domestically," the CBRE report noted.

CBRE also reports that despite the deceleration in Chinese outbound activity, it is expected that Asian investors will remain active abroad.

Tom Moffat, Head of Capital Markets, Asia at CBRE said: "Asia Pacific investors are becoming increasingly recognized players and continue to expand portfolios strategically. The slowing of Chinese investment has prompted the emergence of more diverse capital sources, which illustrates the depth of liquidity and appetite for offshore deployment."

Property companies were the most active investor class and accounted for half of total Asian outbound investment, compared to 27 percent in the first half of 2017.

Real estate investment trusts also accelerated outbound investment, with two Singaporean REITs making their first investment in Europe. On the contrary, institutional investors, who accounted for 45 percent of the region’s total outbound activity in the first half of 2017, were less active this year and comprised 13 percent of the total.

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