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China funds prefer developing US properties
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CHINESE investment in US property development more than doubled in 2014 as real estate developers switch from acquiring land to developing land, said CBRE, an international commercial real estate services and investment firm.
Chinese developers invested US$954 million in property development projects in the US last year, a surge of 186 percent from US$330 million in 2013, said a report released yesterday by CBRE.
“As outbound capital to major gateway cities overseas increases, combined with the relatively high prices of prime properties, growth in asset value as well as the yield rate for investments is expected to drop substantially,” said Eddie Heng, executive director for consulting and investment advisory service at CBRE China.
“In addition, available prime properties are becoming scarce against surging demand, making direct acquisitions of mature assets less sustainable.”
In the US state of California, for example, the yield for mature properties purchased in prime locations was only 3 percent to 9 percent in 2014, while the return on developing a commercial project from a land purchase could be as high as 30 percent, according to CBRE research.
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