Chinese investment in commercial property in Australia is tipped to grow by at least 30 per cent this year after more than tripling to US$700 million in 2013, as Beijing’s biggest insurance companies prepare to make debut investments in the sector.

Sales figures from Jones Lang LaSalle show China’s outbound investment in commercial property in Australia grew from US$209 million in 2012 to US$700 million last year.

Jones Lang LaSalle head of international capital Alistair Meadows said the rate of growth was likely to continue in the current year, particularly given increasing interest from institutional investors such as Chinese insurance companies.

“Australia will remain a market of choice, this is not a cyclical change, it is structural and the momentum will continue,” Meadows said.

China’s global spend in the sector is tipped to pass US$10 billion this year, after hitting US$7.6 billion, last year, well up on the US$3.3bn invested in 2012.

The office sector dominated transactions, accounting for 85 per cent of global deals but there was growing interest in in retail and hotels, as well as residential land development.

Andrew Ballantyne, who is Jones Lang LaSalle’s head of capital markets research, says investors included sovereign wealth funds like China Investment Corporation, high net worth individuals, as well as private and listed developers.

Chinese insurance companies have been running due diligence on the Australia market for the past year to decide whether the regulatory and legal environment lends itself to investing. If they take the plunge, they are likely to start buying up office and hotel assets this year.

“If they decide to invest, we will see significantly greater capital over the next five to seven years,” he said.

The move would be part of a play to diversify their investment sectors and investment geographies. 

The state-owned insurers would be competing with Korean insurance firms, Singaporean REITS and pension funds out of North America, Ballantyne said.

Sydney attracted the fourth-largest sum of Chinese money into commercial real estate, of $423 million, after New York ($2.9 billion), London ($2.1 billion) and Singapore ($953 million).

Of China’s US$7.6 billion global investment, US$2.3 billion went to the UK, (up from US1.3 billion in 2012) and the US with US3.1 billion (up from US$264 million in 2012).

Meadows said the initial catalyst for the dramatic rise in outbound investment was Beijing’s introduction of the ‘Go Global’ policy by the Chinese government.

“As a consequence, insurance groups, developers, and ultra-high net worth individuals have increasingly sought to diversify their real estate portfolios internationally in the last 12-18 months,” he said.

Chinese investors preferred large assets in established, transparent and liquid markets like New York and London. It was largely only Chinese development companies that were interested in development plays, with established assets seen as a safer bet.
 

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