Amid Chinese investment, commercial real estate companies in California show optimism

Commercial real estate investment by the Chinese has increased in recent years, particularly in San Francisco.

With the release of new data suggesting improving commercial real estate activity throughout the next three years, commercial real estate investors from China comb commercial listings looking for relative bargains in the U.S. market, California in particular. 

According to a recent article in Forbes, the large global real estate firm CB Richard Ellis released a report chronicling the billions of dollars being spent by Chinese investors to acquire U.S. commercial assets. And the recent increase in activity is being noticed by real estate professionals. 

The state of China, a Chinese real estate website that accommodates international buyers, 9 percent of U.S. house buyers were Chinese in 2011, accounting for more than $10 billion in real estate sales. In 2012, there was more than $3 billion in Chinese real estate purchases – the bulk of which occurred in California. That $3 billion figure appears to be less than the activity experienced in 2011 because it only accounts for the commercial real estate activity. California is expecting a record amount of transactions this year from Chinese real estate investors, according to the Asia Society.

A reason for optimism
Partly resulting from Chinese investor interest, commercial real estate professionals, specifically those who oversee the investment and development sectors, expressed a positive outlook given current market conditions. With the multifamily and office sectors poised for the greatest gains, the industrial sector has hit a development barrier, according to The Los Angeles Times.

"The issue facing developers of industrial space is the slow growth of foreign demand for U.S. goods and the frugal U.S. consumer demanding higher quality, and not increased quantity of foreign manufactured goods," the California Commercial Real Estate Survey stated. "Both of these translate into slow growth in the demand for industrial space on average over the coming years."

That being said, the survey, conducted by UCLA Anderson Forecast and a local law firm, revealed that the office and multifamily sectors are expected to experience significant gains in development and rent appreciation throughout 2016.

"Since the end of the recession we have seen developer optimism spread to all of the markets and types of commercial space we survey," stated the report. "Today there is the nascent recovery in new nonresidential building predicted by the survey as early as 2010."

Of the strongest performing markets in California, San Francisco, with quickly rising rents and low vacancy rates, is poised for significant commercial real estate growth. More than 50 percent of the respondents said they had a multifamily project set to begin at some point during the next year, as reported by The Los Angeles Times.

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