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Chinese real estate dealsNearly half of Chinese investment in Australia now goes into commercial real estate

Nearly half of the investment that helped make China the largest investor in Australia last year came from a surge in commercial real estate deals, according to a survey released today.

Investment from mainland sources into offices, hotels and other properties nearly quadrupled from 2013 to reach A$4.37 billion ($3.42 billion), thanks in part to a series of large scale asset acquisitions by Chinese developers, financial institutions and wealthy individuals.

The rising role for property deals comes as China’s purchases of other Australian assets declines, leading to an overall nine percent drop in Chinese investment down under last year, according to the study published by KPMG and the China Studies Centre at the University of Sydney.

Third Wave of Investors Driving Real Estate Deals

Deals for commercial real estate assets rose from A$1.29 billion in 2013 thanks in large part to the participation of new types of Chinese investors in the Aussie market, the study found.

Using data and analysis contributed by property consultancy Knight Frank, the report cited the wider role of Chinese property developers and institutions such as banks and insurers in buying assets. Even wealthy individuals from the mainland moved the needle for the commercial property investment as the the initial wave of investment led by sovereign wealth spread to other mainland buyers.

A combination factors including a sliding Aussie dollar, a slumping real estate sector in China and increasing familiarity with the Australian market among Chinese investors combined to make Australia a major target for Chinese real estate investment globally in 2014, the study found.

In a surge of deals at the end of 2014 Chinese investors bought up a string of commercial assets, particularly in Sydney. Among the major transactions were Dalian Wanda’s A$425 million ($332 million) acquisition of Gold Fields House in Sydney, Sunshine Insurance’s purchase of Sheraton on the Park for A$463 million ($362 million) and Shimao real estate’s deal for 175 Liverpool Street in Sydney for A$390 million ($305 million).

Mining and Energy Decline Puts Spotlight on Property

real estate growingReal estate has climbed as a portion of Chinese investment globally. (Source: Dealogic)

The importance of Chinese investment in Australia’s commercial real estate sector came as investment in other areas of the nation’s economy, particularly mining and energy declined.

Chinese investment in the mining and energy sectors combined last year totalled A$1.66 billion, accounting for only 18 percent of the mainland’s total deal value down under. By comparison the total value of acquisitions by Chinese investors in Australia’s power transmission, mining and gas industries in 2013 amounted to A$7.73 billion, a decline of nearly 80 percent.

Ironically, a slowdown in China’s economy, triggered in part by a slump in the country’s property industry contributed to the reduction in deals for energy and minerals in Australia. Now that decline in investment in drilling, pumping and mining makes the Aussie economy more dependent on Chinese investment into the commercial property sector.

The Chinese real estate buying binge has continued in 2015 with more mainland buyers entering the Aussie market, and existing players snatching up more assets. Just last Thursday an Australian subsidiary of Shanghai-based Shenglong Investment bought a pair of sites in Sydney for $141 million, the company’s fifth and sixth property acquisitions down under.

Chinese Real Estate Deals Growing Globally

The study’s profile of the rising importance of commercial real estate deals as a segment of Chinese direct investment represents a trend that is not confined to Australia.

Real estate deals were also on the way up in American during 2014, according to figures compiled by the Rhodium Group, with total deals increasing from $2.2 billion in 2013 to $3.1 billion in 2014. Property ranked second only to the high tech sector as the primary target for Chinese acquisitions in the US.

By contrast, Chinese acquisitions of US energy assets fell to a five-year low of $333 million last year, helping lead to a 14 percent year on year decline in overall Chinese investment into the US in 2014.

Commercial Real Estate Now 46% of Chinese Investment in Australia

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