Asian realty attracts big investments

Chinese property companies invested less in the US and poured $12.5 billion, up 34%, into biggest continent in 2017

Overseas investments of Chinese real estate companies, which focused on the US market until 2016, will target emerging Asian markets more and more in the next two years, industry reports suggest.

Mainland property investment in Asia grew 34 percent to reach around $12.5 billion last year while that in the United States dropped 64 percent to $5.9 billion, data from property research firm Real Capital Analytics showed.

Driven by both growing demand for infrastructure in Asia and the China-led Belt and Road Initiative, Chinese realty players will focus on Southeast Asia and South Asia in particular, according to a report from Colliers International Group, a global real estate consultancy.

The regions promise great potential amid urbanization and economic growth, said Joe Zhou, head of research at JLL China, a provider of real estate services.

Chinese investment in overseas property assets reached a record high of about $39.5 billion in 2017, up 8 percent year-on-year, and seven times higher than that of 2012, Real Capital Analytics said.

In 2017, Chinese investment in realty in Southeast Asia and South Asia surged almost four times to $2.5 billion, half of it in office and industrial property segments.

"Like China back in the 1990s, these markets (such as India, Indonesia, the Philippines and Malaysia) show more demand for infrastructural facilities nowadays, including industrial parks, office buildings and residential apartments," Zhou said.

He said JLL analyzed the property lease business of around 90 Chinese real estate companies in 70 cities world-wide, to find that those operating in Southeast Asia and South Asia generally performed well.

"The smooth expansion of rental business suggested an active customer demand," he said.

As for the China property market itself, many global property giants such as Country Garden operate here. Country Garden's sales surpassed 500 billion yuan ($79.4 billion) last year.

China also experienced a comparable trend of modernization. So, property companies' experience in the China market will likely give them a head start in those markets compared to competitors from developed countries, he said.

"Local clients' basic needs for housing and manufacturing should be met first, and then follow shopping malls and other commercial buildings," Zhou said. "Domestic companies may have richer experience in providing products that match the immature markets."

Andrew Haskins, Colliers International's executive director of Asian research, said, "Looking ahead, we expect China's Belt and Road Initiative to provide an additional incentive for Chinese enterprises to invest in Asian property."

Shortage of stock in Asian markets suggests development projects with local partners will be the key to market access, and opportunities will center on industrial and residential property, he said.

Chinese real estate developers are seeking to lower construction and operational costs, expand into new markets with potential for future growth, and build global brands, Zhou said.

"As companies go global, the most important thing is to obey local rules and serve local people," he said.