The total value of outbound real-estate investment from China rose to US$9.5 billion by the end of September, up 7.1% year-on-year, according to Real Capital Analytics. By contrast, inbound real-estate investment fell to US$22.7 billion, down 27% compared to last year. Thanks to various steps taken in 2014 to deregulate overseas investment, outbound investment is expected to remain robust in 2015, with growth easily outpacing that of inbound investment. Chinese developers and insurance companies are the main sources of the capital heading overseas.
The primary destinations for outbound investment have been gateway cities such as New York, London, Sydney and San Francisco. But investors have been expanding their geographic scope recently into secondary cities such as Boston, Frankfurt and Melbourne. The type of investor looking for international deals is also increasingly varied, with new players entering the market. We predict that over the next few years, investors will expand their reach into a broader range of asset types, as well as increasing the size of deals. Chinese insurance companies such as Ping An Insurance and China Life, as well as developers such as Fosun International and Dalian Wanda, will continue to be the major market players in 2015.
While the flow of capital out of China dominates the headlines, a number of overseas investors are looking for opportunities in China, in particular the retail and logistics sectors, as well as mixed-use projects that have a commercial component. This is underpinned by the continued growth in retail sales and the rapid development of e-commerce, which is outpacing the development of suitable logistics facilities. Real estate in these sectors is tricky to develop and operate, requiring specialised know-how. So investors will be drawn to joint ventures or other cooperative structures, teaming up with experienced Chinese partners, particularly developers. To a lesser degree, investors may seek opportunities in China’s residential sector, as the slowdown in this market in 2014 has placed financial pressure on many developers.