China captured an estimated $57 billion of commercial real estate investment in 2015, securing the country’s position as Asia’s top destination for global capital despite a slowing domestic economy and turmoil in its financial markets.
While Chinese investors shift ever-growing amounts of capital out of China and into real estate assets overseas to diversify their portfolios, a recent investment report reveals that global property investors appear to be moving in the opposite direction and are showing no sign of lessening their appetite for the Middle Kingdom.
According to the latest Great Wall of Money report by international real estate consultancy DTZ/Cushman & Wakefield, the amount of capital committed to property investment in China jumped 21 percent in 2015 compared to the previous year. Individuals based in China accounted for more than half of that committed investment, while the remainder came from outside the country, particularly North America and to a lesser extent Europe and other parts of Asia.
China remained the top investment target in Asia, according to the report’s rankings. The country grabbed a 44 percent share of the $131 billion in investments recorded in the region last year, up from close to a 30 percent share in 2010. Japan by comparison, which ranked fourth globally, brought in less than half the investment of China at around $26 billion for the year, providing a picture of China’s regional dominance as a real estate investment magnet. “China continues to attract a strong share of capital,” says Nigel Almond, Head of Capital Markets Research at Cushman & Wakefield in London and lead author of the report, noting that the most recent investment flows to the country reinforced demand trends previously observed.
Globally, China finished the year well behind the estimated $148 billion that first-place America commanded. The biggest property markets across the globe tended to attract larger inflows of investment, with the combined volume of the top five countries accounting for 69 percent of the $443 billion in total capital worldwide.
China Logistics a Growing Target
China’s logistics industry was one of the key targets for property investors in 2015, although the report does not tally the specific investment value made. Recently, the segment saw Dutch pension fund manager PGGM direct a $160 million investment into the Redwood China Logistics Fund on top of the $270 million already committed to the fast growing mainland warehouse developer.
Institutional investors like PGGM are taking advantage of growing demand for large-scale distribution facilities in China and across the region. China boasts a rapidly growing e-commerce industry and rising middle class consumer base, positioning logistics real estate assets as attractive investments with relatively higher investment yields compared to retail and office sectors in some markets.
Among the top purposes for the cash invested into China was the completion of existing projects, along with new purchases of land.
Ahead, the report’s authors are optimistic that the Chinese government’s stimulus measures and further loosening of relevant policies may help fuel further investment growth. China’s insurance sector, for one, is a potential growth source, with an estimated $70 billion of capital set to be invested globally in the next five years, with the majority of that required to be invested domestically.