WSJ Reports Chinese Lead Foreign Selling of U.S. Commercial Property
February 5, 2020
In a February 4 article by Esther Fung, the Wall Street Journal reports that “Chinese investors sold off billions more in U.S. commercial property last year than they bought, as other foreigners start to sour on the U.S. market as well.”
According to the article, Chinese were by far the biggest foreign sellers of U.S. office towers, retail centers, hotels and other commercial property last year, unloading $20 billion more than they bought, according to data from Real Capital Analytics.
The Chinese government has been pressuring insurers and other big investors to bring money back home, reversing the trend of buying U.S. properties
The article notes that U.S. commercial property prices ticked up 2.5% in 2019, but they advanced only 1.1% in the fourth quarter and were unchanged in December, according to Green Street Advisors, a real-estate research firm. That compares with a roughly 20% gain for property prices in 2010, when the recovery was beginning.
Foreign investors sold $63 billion of property in 2019 and bought $48.7 billion, according to Real Capital Analytics. Removing the Chinese sales from those figures would leave other foreign investors as modest net buyers last year, but at about half the volume as that recorded in 2018.
With interest rates at or near negative territory, U.S. properties have offered some of the best yields in the developed world. Many foreign investors still view U.S. commercial real estate as a safe haven in a slowing global economy. However, the steep prices foreign buyers have been paying in several major cities that have pushed up values may be over. Even though foreign buyers represent a small slice of the American market, their purchases often make headlines.
According to the article, Chinese companies spent tens of billions of dollars between 2013 and 2017 on American skyscrapers, luxury hotels and pockets of land where they intended to build residential towers.
“Sometimes Chinese acquirers set new records, like when Anbang Insurance Group bought the Waldorf Astoria New York for $1.95 billion, the highest price ever paid for a U.S. hotel.” Lately, Anbang has been liquidating some large holdings.
“Other overseas investors have turned cautious after recent regulatory changes—such as rent-control laws in foreign favorites New York and California—which have stoked concerns that the new rules could weigh on income and property values. In New York City, values of rent-regulated apartment buildings have fallen by about 25% in a matter of months.”
Source: Wall Street Journal
