Asset Services Insights - Fall 2016

Fostered by a century and a half of interaction, China and Northern California’s Bay Area have deep economic and cultural ties. From the 1850s to 1900s, San Francisco’s Chinatown was the port of entry for early Chinese immigrants from the Guangdong Province of Southern China. Fast forward to 2012, and 21.4% of the population in San Francisco was of Chinese descent—the highest percentage of any major U.S. city. It’s not surprising that in 2016, familiarity, as well as solid economic fundamentals, makes the Bay Area an attractive place for Chinese individuals and companies to invest their capital. Inbound Chinese real estate investment has increased from 2014 to the present. A Real Capital Analytics study shows that $471 billion has been invested in the U.S. in the last four quarters, and $91 billion of that in California. The built office environment has been the largest growth area, but development opportunities are garnering interest because of the perceived higher return from the low cap rates paid for the existing office product. Chinese investor dollars are fueling the growth of San Francisco, the Peninsula, Silicon Valley, and East Bay, and are also precipitating the California housing bubble—35% of all residential real estate in California is acquired by overseas Chinese investors, $22 billion in the year ending 2014.

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