JLL: How China's outbound real estate investment is breaking records

(China outbound capital restrictions)

It wasn't just your imagination. China's outbound real estate investment really is growing at a break-neck pace. According to the latest data from JLL’s Global Capital Flows, while investment in land, offices and hotels has accounted for 90 percent of all Chinese outbound capital over the l​ast three years, the hotel and industrial sectors showed the largest increase in 2016. The report suggests that this is due to significant transactions in the U.S. in the form of portfolio sales and Chinese appetite for industrial parks. In total, China hit a record $33-billion in overseas commercial and residential property investment in 2016, an increase of nearly 53 percent year-on-year.

“Hotel activity last year was boosted by the purchase of Strategic Hotels and Resorts by Anbang Insurance for over $6 billion,” David Green-Morgan, JLL’s global capital markets research director, said in a statement. “China Life Insurance has secured assets across the hotel and office sectors with portfolio purchases from the Starwood Capital Group and an office tower in Manhattan; sovereign wealth fund Chinese Investment Corporation has been active in the office sector in New York as well.”

Land acquisitions by Chinese investors made a comeback last year, with a rise of 44 percent following significant transactions in Hong Kong, Australia and Malaysia.

“We do believe that Chinese investors will continue to be major movers of capital into global real estate for many years to come,” Green-Morgan said. 

However, he noted, a similar increase in 2017 may be challenging given the recent discussion about China monitoring its capital outflows.

Domestic Investment

Domestic investment in China accounted for more than 86 percent of transactions last year, up from about 75 percent in the past few years.

The tier 1 cities were most attractive to these investors, according to Johnny Shao, head of capital markets for Shanghai and East China, JLL.

“Total transaction volumes in Shanghai reached $14 billion, accounting for 48 percent of China’s total investment volume,” Shao said. ”Beijing was the runner-up, accounting for 16 percent of all the transaction volume in 2016, while Shenzhen came in third, reaching 10 percent of the total.” ​​