GlobeSt.com: What types of properties are these investors seeking and in which submarkets of Orange County?
Cole and Hernandez: Most properties in Orange County that have recently sold to foreign investors with ties to Asian capital have been concentrated in three core product types: office (namely, class-A), hotels and industrial (especially portfolios). Over the past two years, more than 20% of the office deals valued at $2.5 million or greater were transacted with capital originating from Asia. Meanwhile, during the same period, investors from Asia have intensified their interest in industrial and hotel products. Of the more than $1 billion in industrial sales, half of the 45 total transactions had buyers originating from Asia, with GLP, GIC (the Government of Singapore) and China Life Insurance and SkyOcean Holding (a Beijing based private investment firm) leading the way. Similarly, all of the $834 million invested in Orange County's hotel sector originated from investors based in China, Hong Kong and Japan, with Anbang Insurance Group, a Beijing based institutional investor, being the preeminent buyer.

GlobeSt.com: How are Chinese investors' preferences changing as we move further into the real estate cycle?

Cole and Hernandez: In previous cycles, we saw a drive-up of Asian-outbound investment capital into Orange County's multifamily sector; however, we have noticed Asian investors have steered a bit away from this sector recently as this infusion of capital has now moved more into the class-A office, hotel and industrial sectors. With a more diminished attitude these days from domestic institutional investors in acquiring office assets—for the time being anyway—it has been the interest of Asian investors that has risen to the forefront, in many cases. That said, while their interest in office properties is still apparent, these investors have also been more intently focused on the hotel and industrial (in particular, large industrial portfolios) sectors.

Asian investors tend to be driven by long-term investment strategies met with a critical outlook, and while some of the data suggests movement toward and away from various core product types, these buyers are still very interested in well-positioned assets providing stable income. For a multitude of reasons, Orange County is a market, along with so many other US. markets, that Asian investors view more as a monetary safe-haven.

GlobeSt.com: What else should our readers know about this trend?
Cole and Hernandez: We have definitely spent more time in 2016 meeting with groups tied to Asian capital interested in buying commercial real estate in Orange County, namely for attractive, well-located, class-A properties with good in-place income. Earlier this year, the two of us closed the $66-million sale of 1901 Main St., an eight-story, multi-tenant, class-A asset located in Irvine in which the buyer was linked to Chinese investment capital. We continue to field similar inquiries for other deals on the market.

Additionally, sellers are also becoming more receptive to bidders using foreign capital despite the sometimes longer process it may take to close the deal.

Jeffrey Cole

ORANGE COUNTY, CA—A key reason for Chinese investors' attraction to Orange County real estate is that the region has become a more seasoned marketplace during this economic boom that continues to build momentum as a primary market on the West Coast, Cushman & Wakefield's executive director Jeffrey Cole and director Ed Hernandez tell GlobeSt.com. A recent report from the firm revealed that Chinese outbound investment by volume was set to hit a record high in 2016, with $23.5 billion of investment sales recorded over the first eight months, nearing the $25.7 billion invested for the full year in 2015. The report also showed that Orange County continues to be a highly attractive investment market for Chinese capital.

We spoke exclusively with Cole and Hernandez about what attracts Chinese investors to the Orange County market in particular and how their investment preferences are changing as the current cycle matures.

GlobeSt.com: What attracts Chinese capital to Orange County in particular?

Cole and Hernandez: A key reason for the attraction to Orange County is that the region has become a more seasoned marketplace during this economic boom, and while not known as a traditional “gateway market,” Orange County does continue to build momentum as a primary market on the West Coast. It also offers more competitive pricing on a per-square-foot basis than most major gateway markets. Furthermore, Orange County's Asian population ranks it among the most concentrated Asian communities in the US. This is another leading factor why we continue to see strong interest from Asian capital that may also have deep cultural ties within the county.