Chinese investors have emerged as the top source of capital in a weakened Manhattan market.
According to a presentation from Cushman & Wakefield, the dollar volume in the borough stood at $9.9 billion in the first half of 2017. On an annualized year-on-year basis, that amounts to a 50 percent decline. The number of properties sold, meanwhile, was at 309, which comes to a 19 percent drop when annualized.
“It’s really fallen off the map,” said Doug Harmon, the chairman of the firm’s capital markets division.
“The number of properties sold has dropped only 19 percent and the volume is down 50 percent. That means that there’s a lack of bigger deals.”
In spite of the slowdown, Chinese investors have yet to retreat from Manhattan deals. The dollar volume of foreign investment in the borough stood at $6.9 billion in 2017. If annualized, that represents a ten percent decline from last year. China accounted for 64 percent of the total foreign investment in the borough. The country has constantly been expanding its stake in Manhattan. In 2015, Chinese investors accounted for just 18 percent of all Manhattan deals with foreign capital. Last year, that figure grew to 29 percent.
“There’s so much uncertainty in the market today. There is one thing that’s been certain. While investment and transaction volume has declined a lot since 2015, Chinese activity has actually increased. It’s gone the opposite direction,” Harmon said.
Harmon also claims that Chinese investors have yet to lose their appetite for large deals. On a year-to-date basis, the country accounted for three of the four billion dollar transactions in Manhattan.
“On the billion dollar market, the Chinese had been going rapidly,” Harmon said.
However, Harmon doesn’t see this expansion persisting for the rest of the year, pointing to regulatory pressure on big Chinese players.
“I think it’s different for the second half. I’m sure they see that there is ample pressure on the biggest buyers to cool their heels a little bit and not make such a big statement,” he said.
Nonetheless, Chinese investors have already entered into large Manhattan deals this year. Last March, Chinese conglomerate HNA Group bought 245 Park Avenue for $2.2. billion. The acquisition was reportedly one of the most expensive deals ever for a Manhattan tower.
Real Estate Weekly