Chinese investment has spurred a construction boom in downtown Los Angeles, says a recent report by the Los Angeles Times, funding massive building projects on a scale that promises to reshape the city’s skyline. Chinese real estate companies have poured billions into the city in recent years, with seven of the last 18 largest deals in downtown LA since 2014 involving Chinese developers.
As of now, three of the four largest developments in downtown LA are being led by Chinese companies. Chinese real estate behemoth Greenland is overseeing the construction of a $1 billion “city within a city,” aptly named Metropolis, on a 6-acre plot of land purchased for $150 million. When completed in 2018, Metropolis will constitute the largest mixed-use development on the west coast, replete with three towers, 70,000 square feet of retail space, 1,500 residential units priced between $500,000 and $6.9 million, along with an 18-story hotel and shopping complex.
Another $1 billion mixed-use project is being funded by Oceanwide Holdings, a Beijing-based developer, on a 4.6-acre parcel across the street from the Staples Center that it purchased for $174.8 million. Due to be completed in 2018, Oceanwide Plaza will feature 170,000 square feet of retail space, a luxury hotel, and two residential towers.
Such developments are part and parcel of a trend of increasing Chinese investment in the US, which has continued unabated since 2010. Forbes reports that 62.5%, or $10.6 billion of the $17 billion the Chinese spent on overseas real estate in the first five months of this year went to the US, particularly on the west coast. Offices and hotels were the most popular asset classes, comprising 92% of Chinese outbound real estate investment.
Chinese buyers have been the top purchasers of US real estate for the past four years, according to a survey this year by the National Association of Realtors, far outpacing other foreign investors.
As confidence in the slowing Chinese economy and local real estate market wanes, Chinese investors have poured billions into US real estate as a means of diversifying their assets. An uncertain political climate and an aggressive anti-corruption drive have also left Chinese business elites scrambling to cache their money in stable offshore markets while turning a profit.
“For those real-estate investors that do get money out, developing new buildings is a main focus, given that it offers far higher returns but also more risk than buying existing buildings,” said the Wall Street Journal.
Beyond larger returns, splashy and massive developments also serve the function of raising the profile and prestige of Chinese real estate companies that are paying large premiums to showcase their brands in the US.