Real Estate Sector Comment – September 2015

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With Chinese investment into European real estate at an all time high, Eduardo Morcillo – Clearwater International partner in Beijing – looks in more detail at this trend:

Research shows that with over 150 investments worth c. €17bn during 2014, Europe has emerged as a top destination for Chinese foreign investment. A cooling Chinese economy, a weaker Euro and a boom in the overseas Chinese population – emigrants, students and tourists – has driven Chinese interest in the European real estate sector, surging to over €3bn deployed last year. At Clearwater International, we are seeing the highest levels of interest across the construction market, real estate development and hotels sectors.

Across the UK and European Union, Chinese consortiums are linking with EU equity partners to subcontract the majority of construction work on projects. Major players such CITICS Construction, CCCC, and Beijing Engineering and Construction Corp. already have experience working in the West and are looking to increase their presence through subcontracted construction work abroad.

In real estate development, international projects are being planned and executed by several large Chinese players. In particular Fosun, Wanda, and Sino Ocean are eager to add milestone overseas hotel, residential, and shopping mall projects to their portfolios. In addition to these large projects, smaller residential projects targeting sales to Chinese nationals (and possibly connected to investments-for-visa programs) are increasingly popular. The UK was the top European location for Chinese investment during 2014: for example, China Investment Corp. acquired Chiswick Park for €1.2bn and China Life Insurance invested €700m in 10 Upper Bank Street in London.

Within the hotel investment subsector, several Chinese players – including HNA and Jiatiang – have shown interest in acquiring hotel chains with 50-100 hotels under management. Southern Europe seems be at the forefront of this strategy.  Already in early 2015, Chinese investors acquired well-known leisure brands Club Med and Louvre Hotels Group for €4bn and €1.4bn respectively.

Whilst 2014 was a record year for Chinese investment in Europe, at Clearwater International we expect to see continued high levels of activity and capital deployment. We have strong connections across the Chinese real estate market with corporates, investors and banks who are hungry for European investment opportunities as evidenced by our introduction of CIBC to the Manchester Airport infrastructure investment.

Read more about our views on Chinese industrial groups establishing themselves in Europe in our Industrials & Chemicals sector comment.