Chinese investors are buying up US real estate on a large scale

Chinese investors are buying up US real estate on a large scale. The New York Times published an article saying that in the past it was the Japanese. Rich people from Tokyo enter the United States and buy American landmarks...

The New York Times published an article saying that in the past it was the Japanese. Wealthy people from Tokyo enter the United States and purchase landmark American assets, from Rockefeller Center in New York to Pebble Beach Golf Links in California. A quarter of a century later, another group of wealthy people came to the United States to buy real estate – the Chinese.

The New York Times said that although Japanese real estate investment in 1980 was not going well - some Japanese investors paid too much for American assets, and Japan subsequently experienced the largest real estate market collapse in history - Chinese investors are scattering all over the United States.

Individual purchases that began two years ago are turning into a hunt for prime real estate and billion-dollar deals. So far, the fears of the 1980s - when some said Japan would buy up the United States - have not materialized. Instead, the Chinese, or at least their money, are in demand.

Some people say that if the domestic economy declines, China may quickly retreat, just like Japan. Signs of economic weakness in China have emerged, with the financial system recently under pressure. If Beijing steps in to ease tensions in the financial system and stimulate growth, these concerns will disappear.

But in recent weeks, several big deals in New York City have surprised the real estate world. Zhang Xin, general manager of Beijing's largest commercial real estate development company, and Brazil's Safra family teamed up to buy the General Motors Building in midtown Manhattan. Dalian Wanda Group is said to be building a luxury hotel in Manhattan. Wanda also plans to build a hotel in London.

Deals go beyond fiberglass towers: Chinese and Hong Kong investors are also becoming the second-largest buyers of U.S. homes after Canadians.

Steve Collins, international head of real estate agency Jones Lang LaSalle Capital, which recently held meetings for potential buyers in Shanghai and Beijing, said, "They are just the beginning. There is incredible wealth out there."

For now, the Chinese government encourages investment. Bank of China has become the largest foreign financing institution for U.S. commercial real estate transactions. Beijing is willing to diversify its investments. The Chinese government holds more than $1 trillion in U.S. Treasury bonds, but because of low interest rates, these investments earn little.

Thilo Hanemann, research director of Rhodium Group, an institution that analyzes global business and economic trends, said that in the past two years, support for investment beyond fiscal bonds has increased, and Beijing has encouraged Chinese investors to look at real estate in New York and other big cities.

The Chinese are not limited to large projects. Some projects are quite small in scale from a commercial real estate perspective. Zhang Xin, general manager of SOHO China, invested US$600 million to buy 49% of the shares of Park Avenue Plaza in 2011. In the same year, HNA Group, a real estate agency affiliated with a Chinese airline, purchased the No. 1180 Sixth Avenue building for US$265 million. HNA also bought the Casa Hotel store in Times Square.

Chinese investors and institutions have also bought large hotels in California, including the Sheraton Universal in University City, the Crowne Plaza in Burlingame near San Francisco Airport, and the Hilton Ontario in Ontario. They also bought riverfront land in Toledo, Ohio, and an office building in Morristown, New Jersey.

Chinese institutions and investors also believe that the potential returns in the U.S. commercial real estate market will be higher than in other parts of the world. Office, industrial and retail real estate have bottomed out. As the economy improves, office vacancy rates decline and rents stabilize.