What’ll Happen to US Commercial Real Estate as Chinese Money Dries Up?

Jon Market Commentary

See Manhattan.
In the second quarter in Manhattan, Chinese entities accounted for half of the commercial real estate purchases with prices over $10 million. By comparison, in 2011 through 2014, total cross-border purchases from all over the world (not just from China) were in the mid-20% range.
‘At a time when domestic investors have pulled back, foreign parties have ramped up their holdings in Manhattan,’ according to Avison Young’s Second Quarter Manhattan Market Report.
This includes the $2.2 billion purchase in May of 245 Park Avenue by the Chinese conglomerate HNA Group, the sixth largest transaction ever in Manhattan. And at $1,282 per square foot, it was ‘among the highest price per pound for this type of asset.’
The purchase of the 45-story trophy tower is being funded in part by money borrowed in the US via a $508 million loan from JPMorgan Chase, Natixis, Deutsche Bank, Barclays, and Societe Generale, according to CommercialCaf. The rest is funded by HNA’s other sources, presumably in China.
The influx of Chinese money and the propensity by Chinese companies to hunt down trophy assets have propped up prices in Manhattan. And yet, despite the Chinese hunger, total sales volume has plunged, according to Avison Young:

This post was published at Wolf Street by Wolf Richter – Jul 17, 2017.