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Chinese Outbound Investment Booming

- Chinese outbound investment in commercial property is growing rapidly
- Private enterprises and individual investors are the key driving force
- Office buildings are by far the preferred property type
- U.S. is the top destination for investment from mainland China, followed by Hong Kong, Singapore, Australia, and Malaysia
Cushman & Wakefield
2014-10-28 21:44 2839

HONG KONG, Oct. 28, 2014 /PRNewswire/ -- Cushman & Wakefield, the world's largest private commercial real estate services firm, has published an Investment white paper entitled China's Outbound Boom: The Rise of Chinese Investment in Global Real Estate. According to this report, China has emerged as a major global exporter of capital in recent years, with Chinese outbound real estate investment growing rapidly. Data indicates that Chinese outbound investment in commercial property reached a total of about US$33.7 billion in the period from 2008 to June 2014, growing more than 200-fold during that time. Recent huge and highly-publicized real estate deals around the world highlight the growing presence of Chinese investors in overseas property markets.

"We see a variety of fundamental forces driving China's outbound investment trends today," says Mark Suchy, Director of Investment & Capital Markets, East China, Cushman & Wakefield. "Domestic restrictions and cooling market conditions in the Chinese real estate sector are pushing many investors to diversify to developed countries, where signs of economic recovery and the prospect of asset appreciation promise more attractive returns. Positive Chinese policy reform, the strengthening of the renminbi, and the desire of Chinese firms to internationalize are further fuelling these capital outflows."

A variety of investors - including large private developers, state-owned banks and insurance firms, sovereign wealth funds and high-net-worth individuals - are jumping into foreign property markets. Cushman & Wakefield analysis shows that while state-owned enterprises and private firms each contributed around 50% of the total value of outbound real estate investment from 2008 to June 2014, private enterprises and individual investors accounted for a larger share of the number of deals.

From 2008 to June 2014, office buildings are by far the preferred property type, accounting for over 48% of total aggregate investment to date. Office investments experienced a spike in 2013, reaching US$8.4 billion - greater than the sum total for all other asset classes of US$7.4 billion that year. In 2014 to date, office investments also led the way at US$2.8 billion, with development sites (US$1.7 billion) trailing behind.

Ted Li, National Director of Capital Markets, China, Cushman & Wakefield, says, "Chinese investors prefer developed and mature markets in Asia, North America and Europe. The U.S. is the top destination, following by Britain, Hong Kong, Singapore, Australia, Malaysia, Japan and Brazil." China's investments in U.S. property are concentrated in so-called "gateway cities" in the eastern and western coastal areas as well as the Great Lakes region. However, investors are increasingly tending to diversify their asset choices and spread their investments across the country.

Britain is the first choice for Chinese real estate investors in Europe, with London alone taking 62.7% of the European total. In the aftermath of the global financial crisis, EU leaders are looking abroad for foreign direct investment to create job opportunities and stimulate economic recovery. Over the past couple of years, the European real estate sector has emerged as a popular target for Chinese investors.

"Southeast Asia is a favorite location as well, due to its proximity to China and the strong presence of ethnic Chinese communities," Li adds. "In Singapore, Chinese investors prefer to invest in offices, whereas in Malaysia, land development is the preferred vehicle. Many Chinese developers view the Iskandar Malaysia development zone as having huge potential for growth given its close proximity to Singapore."

"Chinese investors face an array of challenges in going global," says James Shepherd, Executive Director, Head of Research, Greater China. "These take the form of government controls on capital flows; talent shortages; differences in corporate and management cultures; and unfamiliarity with foreign legal and regulatory environments, including sometimes-daunting tax laws."

Nevertheless, Cushman & Wakefield believe that Chinese outbound investment will continue its growth trend, as wealthy individuals and capital-rich firms in China look to further diversify and expand their global presence and sophistication.

About Cushman & Wakefield

Cushman & Wakefield is the world's largest privately-held commercial real estate services firm. The company advises and represents clients on all aspects of property occupancy and investment, and has established a preeminent position in the world's major markets, as evidenced by its frequent involvement in many of the most significant property leases, sales and assignments. Founded in 1917, it has 250 offices in 60 countries, employing more than 16,000 professionals. It offers a complete range of services for all property types, including leasing, sales and acquisitions, equity, debt and structured finance, corporate finance and investment banking, corporate services, property management, facilities management, project management, consulting and appraisal. The firm has more than $4 billion in assets under management globally. A recognized leader in local and global real estate research, the firm publishes its market information and studies online at www.cushmanwakefield.com/knowledge. In Greater China, Cushman & Wakefield maintains seven market-leading offices in Beijing, Shanghai, Chengdu, Guangzhou, Shenzhen, Hong Kong and Taipei. More information is available at www.cushmanwakefield.com.

Source: Cushman & Wakefield
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