China Is the 4th Largest Source of Cross-Border Capital in Global CRE

Figure: Top Sources of Cross-border Capital in Global CRE by Buyer Origin

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The last two years have seen a number of shifts in sector distribution of the global commercial real estate (CRE) investment market. The dominance of the office sector has been gradually eroding, from 46% of the market in 2007 to just 35% in H1 2015.  In China and many Asian countries, as real estate markets are continuing to develop, further sector-rebalancing is expected in the mid-term, with the industrial and hospitality segments poised to gain from the shift, as well as alternatives sectors such as senior housing and healthcare.

Another most important shift in real estate since the global financial crisis has been the rise of ’permanent’ capital. Investors such as REITs and sovereign wealth funds don’t have to trade assets as they are not subject to short-term return metrics that tend to make traders out of investors in many other asset classes. In 2014, REITs and SWFs accounted for 32% of international capital flows into US gateway cities, up from 0% in 2009. Frank Chen, Executive Director, Head of CBRE Research, China, commented: “in recent years, the growing presence of ’permanent’ capital has significantly impacted China’s commercial real estate investment market. In the major domestic transactions conducted in H1 2015, ’permanent’ capital accounted for nearly 25%. “

On top destinations of global capital, USA, UK and Germany remain, by far, the three largest CRE investment markets globally. A combined total of US$301 billion transacted in these three countries in H1 2015, an unusually high (74%) share of the global market.  China ranks the 13th with US$4 billion on Top 20 Markets Ranking, reflecting 3 spots down from 2014. 

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