Chinese investors offloaded US$31.7 billion of US commercial real estate over last 5 years, driven by capital controls, lending caps

The largest sale was in 2019, when Singapore-based GLP sold industrial assets worth US$18.7 billion to Blackstone Real Estate Partners

The disposals were first driven by the nationwide deleveraging campaign, but have continued due to a structural shift in the property sector

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The Golden Gate Bridge with downtown San Francisco in the background. Photo: Shutterstock Images

Published: 12:00pm, 10 Mar 2024Updated: 12:13pm, 10 Mar 2024

Chinese investors, once among the most active buyers of commercial property in the United States, sold US$31.7 billion of US commercial real estate between 2019 and last year, 15 times more than what they acquired during the same period, according to MSCI Real Assets, a real estate and infrastructure data provider.

The divestment trend is expected to continue amid the high interest rate environment, leading to continuous declines in asset values in the US. Additionally, some Chinese investors are rushing to sell their foreign real estate holdings to free up cash as they face a worsening property crisis in China, according to analysts.

The largest sale occurred in 2019 when GLP, a Singaporean logistics company backed by a consortium of Chinese investors, sold industrial assets across multiple funds to Blackstone Real Estate Partners, amounting to US$18.7 billion. Excluding the GLP deal, an additional US$11 billion in assets were sold between 2020 and 2023.

In contrast, Chinese investors only acquired US$2.06 billion of commercial real estate assets from 2019 to 2023.

The disposals can be attributed in part to China’s capital controls and the implementation of lending caps in late 2020, known as the “Three Red Lines”, which aimed to reduce debt in China’s highly-leveraged property sector.

There was “a correlation between the rate of dispositions and the tightness of the domestic financing market”, Ben Chow, MSCI’s Asia head of real estate research, told the Post.

He said that disposals by developers increased after the implementation of capital controls in 2017-2018. After the Three Red Lines came into effect, “disposals gradually grew throughout most of 2021 and 2022”, said Chow.

The disposals were driven at first by the nationwide deleveraging campaign, but have continued due to a structural shift in the property sector, where supply outweighs demand, and homebuyer confidence is persistently low, said Shi Lulu, director of Asia-Pacific corporate ratings at Fitch Ratings.