Chinese companies had been the most active buyers of luxury hotels and commercial office buildings in the United States for years, but the situation has taken a turn recently.
According to the Wall Street Journal, Chinese investors are now busy selling off their U.S. real estate.
Data from MSCI Real Assets shows that, since the beginning of 2019, Chinese investors have sold $23.6 billion of U.S. commercial properties.
That marks a turnaround after Chinese were net buyers of nearly $52 billion of U.S. commercial properties between 2013 and 2018.
Experts pointed out some reasons for the shift in Chinese investment in the U.S. real estate market.
Joel Rothstein is chair of the Asia Real Estate Practice at global law firm Greenberg Traurig LLP.
He revealed that China’s real estate investment in the United States began to decline four years ago when Chinese regulators made it more difficult for local companies to transfer funds abroad.
In addition, some of the most active Chinese buyers were struggling with financial troubles.
And the deterioration of political relations between the U.S. and the CCP is another drag on Chinese investment.
In fact, Chinese capital has a huge impact on the U.S. market.
Jim Costello, chief economist at MSCI Real Assets, pointed out that when Chinese companies spent a lot of money on high-profile Manhattan buildings, these transactions became indicators for nearby properties.
Those deals even became reference points for real estate values in other U.S. cities. Accordingly, the influence of Chinese capital has gradually penetrated the U.S. commercial real estate market, pushing up prices across the country.
In 2015, China’s Anbang Insurance Group bought New York City’s landmark Waldorf Astoria Hotel for $1.95 billion. The deal marked the biggest price tag ever for a stand-alone American hotel.
In 2017, China’s HNA Group paid around $2.2 billion for the Manhattan office tower 245 Park Avenue, a 1.8 million-square-foot property. It was one of the most expensive sales of a single U.S. office building ever recorded.
But Chinese investment in the U.S. real estate market has changed course in recent years.
According to the Wall Street Journal, prices for many properties have fallen recently due to rising interest rates, a decline in business travel, and a weak demand for office space.
As a result, many Chinese companies have been retreating from the U.S. market.
Developer China Oceanwide Holdings has lost a number of its U.S. projects to its lenders.
China’s Dajia Insurance Group is looking to divest its multibillion-hotel portfolio, including Essex House hotel near Central Park in Manhattan.
This month, HNA Group, due to its financial troubles, had to sell the Manhattan office tower to real-estate investment trust SL Green Realty Corp.
Doug Harmon is chairman of capital markets at brokerage Cushman & Wakefield. He said that Chinese bids for U.S. properties are rare now, while investors from South Korea, Germany, and Singapore are filling their spots.