China Life took a stake in New York’s 1285 Sixth Avenue, which counts UBS among its anchor tenants
Maybe it’s the Donald Trump factor. Maybe it’s the Broadway shows. Whatever the reason, Chinese investors continue to be drawn to New York City, spending $4.1 billion on real estate assets in the Big Apple during the first half of this year.
That total constituted 80 percent of all Chinese investment in the US during the first six months of 2016, according to Knight Frank’s latest Chinese Outbound Real Estate Investment report.
New York’s appeal helped the America come out tops among popular Chinese investment destinations, even as outflows of Chinese cash into global property markets slid from the same period last year. Mainland buyers shelled out $5.1 billion for US property between January and June, up 21 percent from the same period last year, according to Knight Frank.
Much of this increase is due to a bumper crop of of New York deals, with Chinese investor buying $4.2 billion in real estate within the five boroughs during the first six months of 2016 — an amount equal to 81 percent of the total for all of last year. This increase came as Chinese outbound real estate investment globally slid by 13.6 percent during the same period, totalling $10.7 billion from January through June.
New York State of Mind
New York’s starring role is due to a series of monster investments in the city, with office buildings remaining a favorite. Two of the three largest transactions during the first half took place in Manhattan, with China Life partnering in May with developer Scott Rechler’s RXR Realty to acquire an equity stake in the 1285 Sixth Avenue office tower. The $1.65 billion deal was the first half’s most expensive transaction.
During the same month, China Investment Corporation (CIC) made its first significant deal in the US by scooping up a 49 percent interest in the 1 New York Plaza office tower from Brookfield Property Partners for $700 million.
London Still a Major Despite New York’s Rise
Knight Frank’s Bunny Wang says Chinese still prefer gateway markets
While New York was the biggest target, the market survey found Chinese players continuing to be a significant force in a number of global markets. Mainland investors continue to zero in on gateway markets such as London and Hong Kong where core markets are perceived as being safe despite local issues spooking some buyers.
The report found that the Brexit scare in particular may have been overstated, noting that the UK recorded a 75 percent increase in Chinese investment during the first half when compared to the same period last year, and interest in the city continued seemingly unabated after the vote to leave the European Union.
As in New York, office buildings led the way in London, where China Life also made a major deal, teaming with Brookfield Property Partners to purchase London’s Aldgate Tower for $497 million. In January, China Overseas Land and Investment made news when it bought the Helicon building from Deutsche Asset and Wealth Management for $189 million.
Mainlanders also played a role in property markets closer to home, with a total of $1.68 billion worth of Chinese investment flooding into Hong Kong during the first six months of this year. The appeal of having some of the world’s highest office rents, the Asian financial hub saw major transactions in the period, including mainland financial giant China Everbright’s $1.29 billion acquisition of Dah Sing Financial Centre in Hong Kong’s Wanchai district earlier this year.
Bunny Wang, Senior Director, Head of International Capital Markets and International Project Marketing, Knight Frank China explained Chinese investors will continue to be interested in traditional gateway markets. She added the buying spree that resulted from the renminbi’s steady devaluation against the US dollar bodes well for gateway markets in the short term.
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