Unless you have been hiding under a rock for the past two years you will have noticed the flood of Chinese money into real estate.
Chinese firms have been gradually increasing their standing in EG’s annual Global 100 – a list of the top real estate-owning firms – since the launch of the ranking in 2014. But this year they dominate, toppling long-standing leader of the ranking Brookfield Asset Management.
The new biggest real estate-owning company in the world is China’s Evergrande Real Estate. The Guangdong-based firm raced up the ranking from ninth to second last year, but this year it does more than nudge Brookfield off the top spot – it bounds above the Canadian investor with total assets of $194.4bn compared with $159.8bn.
Combined, EG’s top 100 global investors hold more than $4.6tn of real estate, up from $3.9tn last year. Together, the total value of the Global 100’s portfolio is the same as the GDP of Japan. Only the US and China have GDPs larger.
While US firms continue to dominate the Global 100 in both number and value, Chinese companies are not far behind them.
Some 29 US firms are listed in the rankings, with a combined portfolio value of $1.5tn, while 16 Chinese firms make the top 100 with a total portfolio value of $952.9bn. On average, Chinese firms have a larger asset base than US firms, at $59.5bn to $52.5bn.
Sovereign wealth funds in real estate
Despite being small in number and secretive in nature, sovereign wealth funds continue to capture attention as a result of their ever-growing AUM and corresponding influence on global financial markets.
Alternative assets have emerged as an important part of many SWF portfolios, with investment in real estate their most common route into alternatives. Currently, 56% of SWFs hold allocations to real estate.
Direct investment (78%) remains the most attractive route for SWFs. But some 73% of SWFs invest through private real estate funds. And in a time when the fundraising market is intensely competitive, these capital commitments have the potential make or break a manager’s fundraising plans.
SWFs are not immune to challenges faced by the wider real estate investor pool; the depletion of prime assets due to increased demand and limited supply of institutional-grade property means finding deals at the right price is a concern. Those entering the asset class later may find limited opportunities, particularly when they have such large amounts of capital to deploy.
Despite representing just 0.8% of the institutional real estate investor population, SWFs are responsible for approximately 6% of capital invested in the asset class.
Oliver Senchal, head of real estate products, Preqin
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