RCA Insights

Cross-Border Investors Set Sights on China

By on June 11th, 2019

Buying real estate has never been easy for foreign investors in China. However, the door has been opening and cross-border investors have purchased record levels of commercial property in Asia’s largest market, according to Real Capital Analytics data.

The growing presence of cross-border investors in China marks their increased confidence and familiarity with the market and their ability to compete with domestic developers and institutions.

In the latest sign that the door for cross-border buyers is opening, China introduced a new law which encourages and protects foreign direct investment in the country. With attitudes changing and new laws being implemented, cross-border investment in commercial real estate passed the $6 billion threshold for the first time in Q1 2019.

The more liquid top tier cities – especially Beijing and Shanghai – have benefited. Together, these two metropolises have attracted three-quarters of the cross-border capital flows in the last 12 months.

Cross-border buyers from Hong Kong still get the lion’s share of China’s income-producing commercial real estate – nearly one-third of total volume over the past year. However, investors from other countries in Asia, Europe and North America have been expanding since 2015.

Key recent transactions include a joint venture of U.S.-based investors buying the Sino Horizon portfolio in Beijing for $1.3 billion and the purchase of the Central Walk retail mall in Shenzhen by the Link REIT for $1.0 billion.  Additionally, the pipeline of deals is impressive, with $3.6 billion of cross-border deals in contract now, according to RCA data.

Overall commercial real estate transaction activity in China slowed in the first quarter, so the flows from cross-border buyers marked a positive story. Capital liquidity has been improving in key cities, with Shanghai’s liquidity score hovering around its historic record, RCA analysis shows. This may encourage more capital and a wider variety of sources going forward.

Also on RCA Insights:

Beijing Surges to Become #1 Asia Pacific Market

Chart: Waning Flows From China and Hong Kong