Chinese Buyers Focus on L.A., San Fran

LOS ANGELES-Chinese investment in the west is largely focused on Los Angeles and San Francisco, Greg Karns, a partner with Cox Castle Nicholson here, tells GlobeSt.com. The Asian group's interest in these cities dates back to the early '90s and before the wave from Taiwan hit the US, he says.

As GlobeSt.com reported earlier this week, Chinese investor interest in US real estate is growing day by day, and it's reminiscent of a few decades ago when the Japanese had a strong investor presence here. Karns told GlobeSt.com that there are both similarities and differences between the two groups and the two time periods.

“Chinese investment in those geographic areas is very strong, largely because they have some familiarity with places like L.A., San Francisco, New York and Washington, DC,” says Karns. “They travel there and have friends or relatives there, and there's a large Chinese community in those cities and a comfort level in those places that they don't have in other big cities.”

Chicago, while also a big city, is not as familiar to investors from China, so the known quantities win out. The same is true of Seattle and Vancouver, says Karns. “The problem with these cities is that there's not enough for them to do there. There's some investment working its way into Texas, but their investment there is not confined to real estate, so they may look at them because there are resource plays.”

On the development front, L.A., San Francisco, New York and DC also win among Chinese investors,. For example, when Shanghai Greenland purchased the 275,450-square-foot Metropolis site for hotels, office, retail and condos in Downtown L.A. this past summer, other groups saw it as a green light for them to come in and develop, says Karns. “They figured, 'If Greenland is doing it, we can all do it.' They have this enormous build-up of US dollar, and they're going to send most of it right back here. If you're in any other country than the US, and you have the money to consider overseas investments, you consider the US. It's a normal fascination.”

One reason for the fascination is that real estate investments here tend to be very transparent. “If you're a normal investor, it's much safer to in-and-out sort of investment than many other places for a foreign investor,” says Karns. “They have all the equity they need, they're the pioneers and they're starting a wave that's going to continue for some time. It will breed more and more foreign investments.”

Capital is migrating here from tertiary Chinese cities where the people don't know how to get it to Shanghai, much less L.A., Karns adds. “They're going through urbanization in China that we haven't seen since our industrial revolution. With that, as more and more of China becomes urbanized, we will see more and more of this investment and the Chinese government encouraging it.”