Chinese developers such as Greenland, Oceanwide and Shenzhen Hazens are pouring billions into the neighborhood, adding thousands of new residential units in soaring skyscrapers that will fundamentally change the city’s skyline. Since 2014, Chinese developers have been involved in at least seven of 18 land deals downtown in excess of $19 million, according to real estate firm Transwestern.Both China and possibly the United States (with immigration restrictions given the way the winds are blowing) could stand in the way of profitability:
“When all these megaprojects are finished, they’re going to have to reshoot the postcard picture of downtown L.A.,” said Mark Tarczynski, executive vice president for Colliers International’s L.A. office.
By investing in Los Angeles, the builders are staking downtown’s revival closer to the Chinese economy. A sizable share of home buyers for the new downtown developments are expected to come from China, where many in the middle and upper class are looking to the perceived safety of foreign real estate to diversify their wealth. That trend has been exacerbated by the uncertainty of China’s slowing economy.
The building boom is something of a showcase for Chinese real estate companies, which are willing to pay a premium to establish themselves as global brands. The foray overseas has also demonstrated the many differences between building in both countries — an experience both sides will need to learn from if the U.S. is to remain a prime destination for Chinese capital.
Some Chinese developers in L.A. are expecting Chinese buyers to constitute up to 40% of their clients. As a result, they could be beholden to the whims of Chinese regulators who are currently making it harder to get cash out of China — a move prompted by a steep decline in the country’s foreign exchange reserves. That has led to the first drop in Chinese home-buying activity in the U.S. this year since 2011, according to the National Assn. of Realtors.