The U.S. commercial real estate (CRE) industry is a complicated landscape that shifts often. COVID-19 has put a lot of pressure on owners who cannot attract retail and business tenants. Many foreign investors in U.S. commercial real estate worry that they will lose money before the industry recovers.
As one of the largest foreign investors in U.S. CRE, Chinese companies and individuals have dramatically altered their approach to buying and selling real estate in the United States. Let’s dive into the recent history and emerging trends influencing Chinese investment in U.S. commercial real estate. The more you know, the more easily you can position yourself to profit from the situation.
China Owned More U.S. Commercial Real Estate Than Other Foreign Countries Pre-Pandemic
China stands out as the largest foreign investor in U.S. commercial real estate. In 2018, Chinese investors accounted for 21 percent of foreign U.S. commercial property buyers. Canada came in at a distant second with 7 percent. Mexico, Germany, Italy, Israel, United Kingdom, Venezuela, and Vietnam all tied for third place at 5 percent.
Interestingly, the increased percentage of Chinese purchases went against the general trend of American CRE’s foreign ownership. In 2016, foreign investors spent $7.9 trillion on U.S. commercial real estate. In 2017, the amount fell to $6.7 billion. It declined even further in 2018 to $4.8 billion.
Since the beginning of 2019, as the COVID-19 pandemic adversely affected economies worldwide, China has spent less money on U.S. real estate. Even during such an uncertain time, the sudden shift in strategy has taken many CRE investors by surprise.
Why Chinese Investors Purchase U.S. Commercial Real Estate
Chinese investors started selling much of their U.S. commercial real estate in March 2020. The sales have potentially opened opportunities for domestic investors. They have also revealed how deeply Chinese companies had built inroads into the American economy.
Some American investors and real estate developers, including Paul Murad of the real estate firm Metroplex, says that “Chinese firms have access to what seems like infinite government lending.” He worries that Chinese firms’ financial capabilities have helped the country’s leaders become so enmeshed with American business leaders that they have an unfair advantage when negotiating with the U.S. government.
Whether this is true or an unfounded conspiracy mattered much less in 2020, when China loosened its influence on American CRE. Still, it’s important to note that Chinese firms still own major food, entertainment, technology, and medical companies throughout North America.
Chinese Firms Selling More U.S. Commercial Real Estate Before and During the Pandemic
Anyone convinced that China has been using commercial property as a way to grow its influence around the world has a much harder time making that argument successfully in 2021. Even before the pandemic disrupted the global economy, China started selling properties as financial returns fell. The Wall Street Journal reports that “Chinese investors sold off billions more in U.S. commercial property last year than they bought.”
Other foreign investors followed the trend. Still, the Chinese were the largest sellers of retail centers, hotels, and office towers. In 2020, Chinese firms sold $20 billion more U.S. commercial real estate than they bought in 2019.
The reason behind these sales seems fairly obvious when one looks at the ROI Chinese investors were receiving. In 2010, Chinese companies saw a 20% gain in property prices. As the economy recovered from the Great Recession, CRE prices surged and made a lot of money for investors. In 2019, CRE prices increased a mere 2.5%. During the last quarter of 2019, prices only went up 1.1%.
It’s easy to see why foreign investors would want to pull out of the market and take their profits home.
Buying Commercial Property Owned by Chinese Firms
Chinese firms do not seem desperate to unload commercial properties in the U.S.. They are, however, unloading properties as shopping centers and offices lose tenants. Without reliable monthly revenues, it doesn’t make sense for the investors to retain ownership of U.S. properties. At the same time, investors who bought U.S. commercial properties a decade ago know that they still have time to make profits by selling their real estate.
What probably matters more than anything is the continued disruption caused by COVID-19. Chinese investors might have some time to wait, but they also know that commercial real estate prices will probably continue to fall for a few years. Now might seem like the perfect opportunity to sell.
You can take advantage of this opportunity by focusing on off-market properties. Identifying off-market properties gives you a chance to put yourself first in line when the owner wants to sell. Owners who haven’t thought seriously about selling may change their mind when they hear your offer.
Some of your options for connecting with off-market properties owned by Chinese firms include:
- Networking with attorneys
- Reviewing public records
- Talking to local builders
- Tapping into a database with predictive analytic features
Stay Ahead of U.S. Commercial Real Estate Investors With ProspectNow
Real estate investors need to stay ahead of emerging trends to make decisions that will lead help them make informed choices that lead to profits. ProspectNow has a database that lists more than 40 million apartment and commercial properties. This CRE platform has been an essential tool for real estate investors for more than a decade.
ProspectNow uses predictive analytics to pinpoint properties likely to enter the market soon. Predictive analytics looks at a broad range of variables to determine whether someone will want to sell their commercial property. Once identified, you get detailed property characteristics and contact information so you can reach out to the current owners.
Get started with ProspectNow to take advantage of our most sophisticated predictive analytics and updated database. The next time a Chinese firm plans to sell a commercial property, you’ll have information that lets you get involved before your competitors.