Before specific talk of tariffs between the United States and China, money from the latter into the U.S. commercial real estate industry was already waning.
Last year there was an estimated $7.3 billion of deals by China-based entities here, according to a recent Cushman & Wakefield report. That might seem like a lot, but it was a whopping 55 percent below 2016’s volume.
The main reasons for this were reportedly twofold. New capital controls were put into place by the Chinese government, and the U.S. Committee of Foreign Investment put stricter regulations on such investments. This led to a decrease in institutional investment and more activity by private entities.
As a result of these policies changes – and not even taking into consideration the fallout of the tariff issues between the two countries – investment in U.S. commercial real estate is expected to remain tempered, Cushman reported.
However, the continued strength of the U.S. economy, as well as the stability of the industry, still make it an attractive place for China-based entities to put their money, whatever the current political situation between the nations.
Property types expected to garner the most interest are logistics facilities, research and development facilities and senior and student housing in addition to traditional offices. Interest in hotels and multifamily is not as strong as it was in prior years.
China-based firms are expected to target the gateway cities they traditionally favor: Chicago, Los Angeles, New York City, San Francisco and Seattle. While New York attracts the most money from China, the appetite went down significantly last year, by 54 percent. San Francisco, the second largest, saw a 52 percent drop, and smaller deals are more the norm for both cities.
U.S. commercial real estate transactions by firms in China might have been down in 2017, but overall global investment in the industry was not. In fact, it reached a new record, hitting $50.7 billion, up 19 percent from 2016. Sellers in the United Kingdom benefited significantly from the U.S. pullback, enjoying $15.4 billion in transactions. That’s more than triple what was spent there in 2016.
Cushman’s report was constructed before the current tariff situation, so it remains to be seen whether or not that will mean even less transaction activity funneling here from China. So far though, it’s probably safe to say we most likely won’t see an increase as a result.
About GRS Group:
GRS Group is a leading provider of commercial real estate (“CRE”) services worldwide. With offices across the United States, Europe, and affiliates around the globe, GRS Group provides local market knowledge with a global perspective for institutional real estate investors, occupiers and lenders worldwide. The GRS Group team has evaluated and advised on over $1 trillion in CRE transactions.
Through the company’s proprietary management process, Global Services Connection, GRS Group delivers an integrated suite of services including Financial Advisory, Transaction Management, Assessment and Title Insurance. We provide a single point of contact, capable of leveraging the GRS Group portfolio of companies and delivering customized solutions to assist our clients in achieving their investment goals.