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Mainland Chinese investment in European property triples in 2013

Chinese investment (ex Hong Kong) in Europe tripled last year as insurers, developers and private individuals joined the country’s sovereign wealth funds in seeking to diversify their assets outside Asia.

That’s according to analysis by research firm Real Capital Analytics (RCA).
 
Chinese investors purchased EUR3.05bn of commercial properties across Europe last year after they bought EUR978m of real estate in 2012, according to data compiled by RCA. The number of buildings acquired, including those that formed part of portfolio transactions, rose to 43 in 2013 from 10 a year earlier.  
 
Joseph Kelly, RCA’s director of market analysis EMEA, says: “After an initial wave of investment by sovereign wealth funds, that was focused on large trophy assets in London, wealthy individuals, developers and insurers have become increasingly active across a broader range of property types, lot sizes and European locations.”  
 
In May 2013, China’s regulator relaxed rules restricting investment by insurance companies, to permit purchases of overseas real estate. A month later, Ping An Insurance made its first overseas property acquisition with the EUR304m purchase of the Lloyd’s Building in London. The regulator has also doubled the proportion of capital that Chinese insurers, which have a total of RMB7.4trn (EUR900bn) in all investment asset classes, are permitted to invest in infrastructure and real estate to 20 per cent from 10 per cent previously.
 
Private Chinese investors, such as Jianping Xu, were also active in European real estate in 2013, with Xu acquiring a development site in Germany, while the Kang family added two hotels in Ireland to their existing hospitality property holdings in China.
 
Already in January we have seen what could be the largest transaction in Europe for 2014 involving a Chinese buyer, with China Investment Corp.’s agreement to purchase the Chiswick Park business estate in west London from Blackstone for around EUR917 m. Separately in another early January closing Chinese state owned developer, Greenland Group has purchased The Ram Brewery mixed development site in South West London, highlighting the migration of capital outside of core central London and this cross-border flow trend into 2014.
 
Gingko Tree, an investment arm of the State Administration of Foreign Exchange, was China’s most active buyer in Europe’s real estate markets in 2013, acquiring 16 properties for EUR1.82bn.
 
Kelly says: “It is hard to see the cross-border capital flows from China into European commercial real estate slowing any time soon. The easing of investment restrictions imposed on Chinese insurers, attractive pricing and improving development opportunities are just some reasons that why we expect another increase in investment this year, with companies and wealthy individuals also looking to diversify outside China in good quality assets that generate a reliable and secure rental income.”

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