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Faltering Chinese economy raises real estate investment fears

On Behalf of | Sep 3, 2015 | Commercial Real Estate

Kansas residents may recall how Japanese companies and investors made headlines in the 1980s by purchasing iconic pieces of American real estate. Japanese investment quickly dried up after the economy in that country stalled, and some financial analysts fear that Chinese investment in American real estate projects may also dwindle after the Chinese stock market plummeted and the yuan was devalued in August 2015.

However, some observers feel that these concerns are unfounded. They say that high-profile transactions by Chinese investors such as the purchase of New York City’s Waldorf Astoria Hotel in 2014 has led many to believe erroneously that the domestic commercial property market relies heavily on Chinese money. While Chinese investors did pump $5.9 billion into major American commercial property developments between September 2014 and August 2015, this figure represents less than 10 percent of total foreign investment. The largest foreign investors in U.S. commercial property were Europeans with $19.7 billion in investments.

Some financial experts feel that slowing growth rates in the Chinese economy could prompt greater investment in high-yield investments like American real estate as investors feel the need to diversify. While large-scale commercial projects may monopolize headlines, Chinese investors seem more interested in residential real estate. The National Association of Realtors report that 28 percent of all foreign investment in American residential property comes from China.

Commercial property transactions involving foreign investors are sometimes difficult to close in a timely manner. Zoning issues, funding problems and permit disputes can lead to expensive delays, and dealing with parties who reside in different parts of the world can add a further layer of complexity. An attorney with experience in this type of transaction may be able to help commercial property buyers, sellers and developers avoid such issues by reviewing the documentation for possibly contentious language and taking the steps necessary to avoid disputes.