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City of attractions

Connectivity to the rest of the United States has been a crucial part of Los Angeles’ success in attracting investment in recent years. Increasingly the region’s port and airport have become main entry points for the Pacific Rim countries, with international passenger traffic rising 8.7 percent in 2017. Size and economic strength are also critical factors. “With 10 million people living in LA, representing a quarter of California’s population, the market has metropolitan scale and market size to support healthy investment activity,” notes David Doupe, Americas Capital Markets with JLL. “Meanwhile, the LA economy is highly diversified, but also one of the largest in the U.S. in terms of output.” So while Los Angeles was originally slower to recover from the recession than Northern California, its subsequent growth has been built on a broader industry base. “That provides a more sustainable economy, with no real single industry sector risk,” says Tom Bohlinger from JLL’s LA Capital Markets team. In addition, Los Angeles has successfully groomed clusters of specialization, most notably in the tech, media and new media sectors, said Bohlinger noting major new commitments to the city from industry giants.

Sunny investment climate

LA has emerged as leader of the pack of city ‘Contenders’ that have been closing the gap on the ‘Big Seven’ (London, New York, Paris, Singapore, Tokyo, Hong Kong and Seoul), established world cities that have, traditionally, been the most successful in attracting global real estate investment. These contenders are all starting to acquire many – or most – of the attributes of the top cities: gateway connectivity to their national and continental economies, effective metropolitan scale and market size, the trust of global capital, a diverse talent pool and multiple clustered specializations. LA’s relative affordability and availability of product in comparison to other global gateway markets is key to its appeal for investors, especially foreign ones, says Pranav Sethuraman, Global Capital Markets Research with JLL. “Strength and diversity of the local economy” also plays a part, he adds.

Chinese Investment May Be Down In U.S. Real Estate, But Investors Still Love These Cities

Top real estate investment firms LA
Despite Chinese investment in U.S. real estate declining 55% after the advent of strict government regulations on outbound investment, Chinese capital markets remain keen on five core markets. New York, San Francisco, Los Angeles, Seattle and Chicago will continue to benefit from Chinese investment even though the overall amount in each city will be much less, according to a report from Cushman & Wakefield. Unsplash/Thomas Harbor New York, San Francisco and Los Angeles made up 72% of deal volume from Chinese investors in 2017, according to Cushman & Wakefield Senior Managing Director, China Direct Investment Xinyi McKinny. Chinese investors have historical ties to these cities and many prefer to invest large amounts of money in cities with which they are familiar, she said. “Over the years they will start to look at other cities,” she said. “Culturally, they are not familiar and … not comfortable with secondary and tertiary markets.” Cities such as Washington, D.C., Houston, Dallas and San Antonio are starting to pique the interest of investors, according to the report. McKinny said investors are starting to consider Austin and Denver, but Chinese investors will remain committed to the markets they know well.  While there may be few opportunities to make purchases in multiple markets, some Chinese investors like HNA Group and Dalian Wanda have been under pressure by the Chinese government to sell their real estate. HNA Group said in February it plans to shed up to $4B in properties in New York, including the recently purchased 245 Park Ave. HNA also is in talks to sell off its stake in Park Hotels & Resorts, a spinoff of Hilton. Gaw Capital Partners, a Hong Kong investor that does not fall under the same restrictions, has been actively buying up properties in New York and San Francisco, including ones sold by HNA Group. Check out how each of the top cities for Chinese investment performed below. New York
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