Mainland commercial real estate investors seen favouring Hong Kong

Mainland investment in commercial real estate around the world will continue to grow this year as Chinese companies are encouraged to invest abroad.

Hong Kong, the United Kingdom, the United States, and Australia are the preferred destinations for mainland property investors, which include big private corporations as well as state-owned enterprises, according to Alastair Hughes, chief executive of Jones Lang LaSalle Asia Pacific.

In the first three quarters of last year, offshore investment by mainland enterprises in commercial real estate was US$1.97 billion, according to the property services firm. It estimates the full year total to be US$2.5 billion. Total investment will continue to grow this year, it said.

The figures compared to US$670 million in 2010 and US$2.9 billion in 2011.

"Chinese buyers will continue to do two things. One: buy in Hong Kong. Two: buy elsewhere in the world, particularly the US, the UK, Australia, and other parts of Asia," Hughes said in an interview with the Post.

"Since 2003, of all the money that Chinese investors have invested outside China in commercial real estate, about 44 per cent was invested in Hong Kong. We do not see that overall trend changing dramatically."

Jones Lang LaSalle believes there will be more offshore investments by mainland institutions this year and beyond. Chinese developers are also set to become more active globally, it says.

China's outbound direct investment in non-financial sectors rose 39.4 per cent year on year to US$47.68 billion in the first eight months, according to the Ministry of Commerce.

As capital flows from mainland institutions headed offshore, international funds were showing an increased interest in investing in the mainland commercial property market.

"The volume of offshore investments in Chinese commercial real estate doubled from 2008 to 2010," said Hughes. Some US$9 billion of deals were done in 2008, compared with US$18 billion in 2002.

Hughes said the commercial property market in China was increasingly available to international investors.