London Biggest Draw as China’s Outbound Real Estate Investment Jumps 17%

China’s outbound investment in real estate jumped 17 percent during the first half of 2014, with London receiving more than $2.3 billion in capital inflows according to a statement today from an international property consultancy.

Overall Chinese outbound investment in property rose to $5.4 billion from January to the end of June, with commercial investment accounting for nearly $4 billion of that total, according to the statement from US-based real estate services firm JLL.

The biggest change came from residential investments, which increased 84 percent compared to the same period last year, to reach $1.5 billion during the period.

In terms of cities, the $2.3 billion invested in London was nearly four times more than the capital headed to its nearest competitor, San Francisco, which garnered $548 million in investment during the first half of the year, according to JLL’s figures.

Major Deals in London and San Francisco

Both London and San Francisco benefitted from headline property investments during the second quarter, with China Construction Bank buying a London office tower for $187 million and China Life Insurance picking up its own office block for $1.35 billion, both during June. Also during the first half, China Overseas Holdings, a division of developer China Overseas Land, closed on its $257 million acquisition of Stephenson Harwood’s offices in London from Invesco Real Estate.

In San Francisco, a Chinese golf course developer bought a downtown office block for $350 million during May.

London also benefitted from substantial investments in development projects by Chinese companies, with Shanghai-based Greenland Group buying a plot on the city’s Canary Wharf, as well as the site of the historic Ram Brewery. In its statement, JLL attributed the development interest in London to the city government’s decision to encourage infrastructure investment.

Chinese Investors Seen Targetting More Cities

Following London and San Francisco in the investment destination rankings were Chicago (which benefitted from a downtown acquisition worth more than $304 million), Sydney, Madrid, Melbourne and Los Angeles.

David Green-Morgan, Global Capital Markets Research Director at JLL, said: “Although the Chinese investors have been very active in the world’s major cities in the first half of 2014, we are seeing them energetically pursuing opportunities right across the spectrum of geographies and sectors.”

JLL puts outbound investments by Chinese firms and individuals at $11 billion for 2013, but expects cashed up buyers from China to be even more aggressive this year.

“Given the continued rise in Chinese outbound investment over the first half of the year and the pipeline of groups looking to invest outside of China, then full year 2014 outbound investment should easily eclipse the 2013 level of US$11 billion,” noted Green-Morgan said in the statement.

In terms of new trends, JLL noted the growing willingness of China’s insurers to head overseas, as well as more activity devoted to grabbing a slice of overseas travel by wealthy Chinese consumers. “Developers and insurance companies remain the most active investor groups with a notable increase in interest for hotel and hospitality products in hot Chinese tourist destinations,” noted Darren Xia, Director of the International Capital Group (ICG) at JLL China.

China Life Insurance’s acquisition in London was by far the largest investment transaction of the first half, while Dalian Wanda’s $358 million acquisition of a landmark Spanish skyscraper was at least partially targetted at hotel development.