Chinese To Invest $780M This Year

LOS ANGELES—According to recent research from JLL, the Chinese are estimated to invest $780 million in Los Angeles real estate this year, and with the country pumping out $15 billion globally, Los Angeles is taking a significant portion of the pot. Chinese investors have been amplifying up their real estate investments over the past few years, spending $5.6 billion in 2012 and then $11.3 billion in 2013 in real estate ventures internationally—and Chinese investors seem to be finding more and more opportunities in Los Angeles, with a special focus on downtown, where there are currently several major Chinese development projects underway, including the Metropolis project. To better understand the growing trend, we sat down with Jeff Adkison, EVP at JLL. Here is what he had to say:

GlobeSt.com: What is driving Chinese investors to the L.A. market, and why now?

Jeff Adkison: Chinese investors are seeking opportunities to diversity and mitigate risk. For institutional investors, Los Angeles offers a stable economy with a political climate friendly to real estate development, and opportunities for high profile projects. Los Angeles is an attractive city due to its cultural connections and proximity to Asia, and economic opportunities for long-term growth. Los Angeles's world-class universities and brand as the “entertainment capital of the world” create an extra incentive for Chinese nationals interested in education, lifestyle tourism, and investment.

GlobeSt.com: How does the presence of Chinese investors and capital in L.A. compare to other gateway markets in the US?

Adkison: Los Angeles is capturing a large share of Chinese investment in the current cycle. During 2013, Los Angeles ranked second, after Manhattan, among the top ten cities in the United States for investment in U.S. commercial property.

GlobeSt.com: What types of investment opportunities are these investors most attracted to?

Adkison: Chinese investors have demonstrated a unique boldness in Los Angeles throughout the last three years. Initially, Chinese acquisitions were strictly income-producing properties with a focus on hotels. As the recovery progressed, Chinese firms began acquiring mixed use development sites and forging ahead into the brave new world of full-scale development. Today, Chinese developers seek large scale, entitled development opportunities close to downtown Los Angeles' urban core. As the phenomenon matures, we expect to see broader interest from Chinese firms in suburban and secondary California cities, particularly areas with existing Chinese communities.

GlobeSt.com: Is this a small group of the same institutional investors, or are new investors finding opportunities in the L.A. market?

Adkison: For many of the groups making investments in development sites, this is their first United States acquisition.

GlobeSt.com: This report is specifically about Chinese investors. Is there a reason Adkison: Chinese investors are more attracted to this market than other Asian countries? Is this more about the L.A. market or Chinese economy?

Global Chinese investment in offshore real estate has taken a sharp increase. In 2014, offshore Chinese investment in real estate totaled $15 Billion, a nearly $10 Billion increase from the $5.6 Billion recorded in 2012. The majority of this investment is concentrated among a select few markets, specifically, the United Kingdom, Singapore, Australia, and the United States. As mentioned, within the United States Los Angeles is capturing the second largest share of Chinese investment. Therefore, on a global scale, Los Angeles is receiving special attention from Chinese investors.