How Chinese Investors Can Find Long-Term Success In US Real Estate
Some of the biggest investors in America’s biggest industry are certain history is repeating itself. The Americans believe Chinese real estate investors will invest as recklessly and lose as much money as quickly in the US as Japanese real estate investors did 25 years ago. The Japanese lost more than $10B buying US buildings at inflated prices, then selling them back at large discounts after their investors failed to earn the profits they expected.
Chinese investors are now pouring into the US to buy real estate just as the Japanese did between 1988-93. To American eyes, it all looks very familiar. Like the Japanese, the Chinese almost overnight became one of the largest foreign buyers of US real estate. Also like the Japanese, the Chinese are mainly still targeting the same small group of assets—big, well-known office buildings and plots of land in just three cities: New York, San Francisco and Los Angeles. Pushed up by all the Chinese money, the price of Manhattan office buildings is at a record high of above $1,400/SF.
The term “China price” has taken on a new meaning in the US. It used to mean that goods could be manufactured in China at least 33% cheaper. Now it means that US real estate can be sold to Chinese buyers for at least 33% more. Convincing US sellers to agree to a fair price, rather than a Chinese price, takes up more time than anything else we do when representing Chinese institutional buyers in US real estate transactions. While there are similarities between Chinese real estate investors today and Japanese investors 25 years ago, we also see some large differences. American investors should not start counting their money before it’s made. Based on our experience, we see Chinese investors becoming more disciplined, more aware of the risks, more professional in evaluating US real estate.
Category : Blog