Chinese insurance funds target overseas prime office real estate


Chinese insurance funds have more than US$14 billion available for overseas real estate investment, with the UK, US, Canada, Singapore, Hong Kong and Australia among some of the key global targets, according to new research from CBRE.

This investment focus is being driven by the scarcity of prime investment properties in first-tier Chinese cities and the short-term risk of oversupply in second and third-tier cities.

According to CBRE research, investors are expected to focus on prime office properties in high transparency markets due to their ability to produce yields in today’s low interest rate environment.  
Other drivers include abundant liquidity, local currency (RMB) appreciation and the relatively lower valuation of overseas assets in the years following the Global Financial Crisis.

Marc Giuffrida, Executive Director of Global Capital Markets at CBRE said Chinese insurance institutions are already well established in domestic markets, however their focus is turning to overseas commercial real estate markets following a series of government policy changes.

Chinese insurance funds have only been permitted to invest in real estate since in 2009, when changes were introduced to government policy.

“The insurance industry, in particular, is thriving; buoyed by ever-increasing funds they will target gateway cities around the world such as London, New York, Toronto, Singapore, Hong Kong and Sydney in increasingly large amounts,” Mr Giuffrida said.

“The low liquidity, value-added potential and stable cash flow of prime office and retail assets offers a perfect match for these investors.

“Compared with developed countries, the allocation by Chinese insurance companies to overseas real estate investment is still relatively low, even with a modest increase in allocations given the capital base the flows could be quite substantial.

“Using the Malaysian and Korean outbound investing experience as a guide, big industry leaders will lead the way, but once they demonstrate success the rest of the industry to follow.”

Further regulation changes put in place to encourage sustainable investing now permit insurance companies to invest a maximum of 15% of their total assets as of the end of the last quarter in ‘non-self-use’ real estate.

Frank Chen, CBRE Head of Research - China, said that now is the time for Chinese capital to enter the overseas market, not only for institutional investors, but also individuals who are looking to preserve and create wealth, immigrate or gain a better education for their children.

“In addition, companies that are initiating new growth points, seeking more diversified investment channels and expecting to learn from the best international practices are also looking further afield,” said Mr Chen.

Richard Butler, Senior Director of International Investments at CBRE said Chinese institutional enquiry for well let office buildings in gateway city locations such as Sydney, Melbourne and Brisbane, is increasing rapidly.

“There seems to be an attraction to Australia in particular because of the proximity to Asia and the long term history of Asian investment generally combined with the time zones of Asia and Australia making cross border deals and asset management relatively easily when compared with the more distant markets of the U.S. and Europe,” Mr Butler said.

“Additionally we are very cognizant of the activity coming from high net worth individuals from China with some large deals occurring around the region.”

Show Comments
advertise with us
The Urban Developer is Australia’s largest, most engaged and fastest growing community of property developers and urban development professionals. Connect your business with business and reach out to our partnerships team today.
Article originally posted at: