CBRE: China insurers to allocate $14.4bn to overseas RE

The world’s largest property services firm says the amount China’s insurers could invest in international property equates roughly to one quarter of the total capital cross-border flows in the world’s eight largest non-Chinese cities.

The world’s largest property services firm CBRE has predicted that as much as $14.4 billion will be invested in real estate globally by Chinese insurers following a change in rules allowing them to increase their allocations to the asset class.

CBRE estimated in a report published yesterday, that the new regulations have freed up $180 billion for real estate investment by Chinese insurers overall. Based on their historic allocations of up to 6 percent to property investments and assuming an 80:20 split between domestic and international investments, CBRE estimated that Chinese insurers could invest up to $14.4 billion to international investments.

Marc Giuffrida, executive director at CBRE Capital Markets, told PERE that figure is the equivalent to about 25 percent of the entire annual real estate cross-border capital flow in the world’s eight largest non-Chinese cities.  

Chinese insurance companies are expected to deploy that capital gradually, however, with the most popular overseas markets expected to be the developed, transparent markets like in the UK, the US, Canada, Singapore, and Australia.

“We are expecting the big guys like Ping An [Insurance] to lead the way,” Giuffrida said. So far, both China’s government and the country’s insurance companies have adopted a conservative and measured approach to overseas property. But in the past few months CBRE has received more requests from the Chinese insurance companies about international property indicating an appetite for greater activity.

“As they’re getting started, we expect [the insurance companies] to get good advisors that can do the heavy lifting in real estate transactions,” Giuffrida added.  He said that Ping An’s deal with Gaw Capital’s Downtown Properties represented an example of the sort of early deals that might be transacted by Chinese insurers outside of China. A few insurance companies are also contemplating co-investments with such real estate funds, and should focus primarily on stable core assets.

Giuffrida said that, for now, he does not expect insurance companies to become limited partners in funds to any great degree, because in China there is a strong demand for control over assets. But since these companies do not have international real estate teams of their own yet, he added that private equity real estate firms should see Chinese insurance companies more as potential partners with which to do direct deals.