The Chinese real estate market is imploding.
Even the richest man in China — and his son — have been on a selling spree since last August. Their Pacific Century Premium Developments firm just signed an agreement to sell its holdings in Pacific Century Place for $928 million – a 30 percent discount to last year’s asking price.
“The disposal of a landmark project in the center of Beijing – two office buildings, two blocks of serviced apartments, and a mall – confirmed that Li Ka-shing and son Richard have turned bearish on Chinese real estate,” according to Forbes.
Chinese investors will continue investing billions into the U.S. commercial real estate market for diversification, growth, and security,” said Harmel Rayat, a real estate investor.
Smart investors have every right to be concerned, as property values set up for a plunge.
It’s just part of the reason smart Chinese investors are flocking to U.S. real estate. “There’s plenty of room for more upside,” said Rayat. “With the value being offered, China’s investors are just beginning to invest in U.S. commercial real estate, as China GDP slows and investment regulations change.”
In the first quarter of 2014, outbound Chinese real estate investments rocketed 25 percent to $2.1 billion, according to commercial real estate firm, Jones Lang LaSalle.
“We expect interest and activity from equity-rich Chinese investors in overseas real estate markets to continue to grow throughout the remainder of 2014 and, as a result, it is possible that the total volume of spend by Chinese investors on commercial real estate outside of China could pass the $10 billion mark in 2014,” noted Darren Xia, director of the International Capital Group at Jones Lang LaSalle China, as quoted by Forbes.
In recent months, Fosun International bought the 60-story One Chase Manhattan for $725 million. Beijing real estate mogul Zhang Xin took part in the $1.4 billion purchase of the General Motors office tower.
Greenland Holdings Group took a 70 percent stake in a $5 billion Atlantic Yards project, and acquired a 25,600 sq. meter site in Los Angeles from the California State Teachers’ System with plans to build a hotel, offices, and high-end homes. The company is looking to invest another $5 billion to $8 billion abroad this year.
Silicon Valley commercial real estate firm Kidder Matthews is partnering with Tsinghua Real Estate CEO Chamber of Commerce “to act as a bridge for Chinese investment which wants to come to the Bay Area,” says SFGate.com.
Dongdu International (DDI) bought the David Stott Building for $4.2 million and the Detroit Free Press building for $9.4 million with plans of turning it into a $50 million retail and residential complex shortly after Detroit’s July 18, 2013 bankruptcy filing. Chinese investors bought the New York Cassa Hotel, whose owners were in bankruptcy court in 2012.
“At the moment, we’ve seen no evidence – seen nothing that says there will be a slowdown [in deals],” says Steve Blank, senior resident fellow for the Urban Land Institute (ULI), as quoted by The Washington Post. “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.”