Over the past few years, countless real estate industry headlines have focused on Chinese investors and their ongoing and genuinely staggering level of involvement in the commercial and residential real estate sectors. According to our own independent analyses, the past five years of data indicate Chinese investors are responsible for putting well over $100 billion into commercial and residential real estate properties throughout the United States.
While most of the attention has focused on the more high-profile efforts made by foreign investors to secure safe assets offshore — including, for example, the $2-billion sale of the Waldorf Astoria to the China-based insurance group Anbang as well as its failed attempt to secure the Starwood Group for a sum of $14 billion — a great deal of the activity taking place during the past five years reflects a high-volume effort inspired by a number of economic factors. It is these same economic factors that point to the likelihood that foreign investment will double over the course of the next five years.
The fall of the yuan is one of the primary motivating factors pushing Chinese investors into the US real estate market, as the projected stability of the US real estate market serves as a vehicle for wealth preservation in the face of growing concern regarding the yuan. With few limitations on foreign-based real estate purchases in the US, Chinese investors are essentially free to enter the real estate market, often with the goal of investing in a rental or resale property. Of course, many foreign investors also rely on a real estate investment as a vehicle for securing legal entry into the US via an EB-5 investor visa.
It’s worth noting that any analysis of Chinese activity in the US real estate market is quite likely to be underestimating the full extent of investment activity over the past five years. This is due to the simple fact that a large volume of foreign investments can be executed through front companies or trusts that are not necessarily subject to public disclosure. As a result, the historical data, as well as the predictive analyses based on that historical data, does not necessarily provide a comprehensive view of the sizable Chinese real estate investment activity in the US.
Although it is not possible to understand the complete extent of the investment activity undertaken by Chinese investors, it is clear that the activity is indeed substantial enough to have an impact on some of the nation’s largest and most expensive real estate markets. In fact, the bulk of the activity from investors based in China has focused on markets that include San Francisco, Miami, Chicago, Seattle, Los Angeles, and New York.
During the next five years, it is possible and perhaps even quite likely that Chinese real estate investments will account for a sum approaching $220 billion or more. While the bulk of that investment will likely be directed toward commercial properties, the residential real estate market in the US will also experience a continued rise in activity from foreign-based investors, with investors based out of China accounting for the majority of that activity.