Chinese investment in Vancouver commercial property from companies such as Anbang Insurance Group Co. has slumped amid a flood of regulations, with investors looking to Toronto instead.
Asian investments in Vancouver fell to almost $350 million in 2018, a drop from the $1 billion-plus that hit the market in each of the two prior years, according to data from CBRE Ltd. In contrast, Toronto took in $526 million of Asian investment last year, up slightly from 2017, including a $256 million purchase of an office building by Chinese private investor Tigra Vista Inc.
Chinese investors are retreating globally following government restrictions on capital outflows in 2016. In Vancouver, Asian investment dropped off even more last year due in part to a series of new taxes instituted by the government, including a speculation and wealth tax on homes. The province has also proposed a bill to expose hidden land owners -- both residential and commercial -- and failure to disclose may result in a fine of C$100,000 or 15 percent of the property’s assessed value, whichever is greater, is driving away some investors.
“You have policy changes on a snap, on a whim,” David Ho, executive vice president at CBRE Ltd., said in an interview at Bloomberg’s Vancouver office. “Investors typically look at stability in a market and this is not stability.”
The numbers provided by CBRE are only based on known buyers though many “go to great lengths to protect their identities and remain confidential,” the brokerage firm said.
Ho focuses on bringing in new Asian capital to North American cities and while 90 percent of his business was in Vancouver last year, he predicts the city may account for only a fraction of the foreign capital this year with more deals done in Toronto. In total, Asian capital flows are projected to take up less than 20 percent of Vancouver’s commercial market, said Vancouver-based CBRE broker Tony Quattrin, compared to over 25 percent in the past three years.
Last month, Blackstone Group LP and Hudson Pacific Properties Inc. teamed up to buy Anbang-owned Bentall Centre in Vancouver. The Chinese insurance firm has been ramping up efforts to offload assets after being temporarily seized by the nation’s regulator.
In Vancouver, Chinese investment “had always been predicated on land, placing bets on land, whether it’s old shopping centers or office buildings even -- they see underlying development and land value,” Bal Atwal, a principal at brokerage firm Avison Young, said. “They’re looking at Toronto now because they’re seeing a better arbitrage on that than they are here.”
Asian investors, who previously had marginal interest in looking east of Vancouver given the flood of opportunities, are now being forced to diversify their holdings. To cater to growing demand, CBRE is planning to shift more of its focus to bringing Asian investors to Toronto, which has a booming tech and financial services market, fueled by a flood of immigrants and millennials.
“That spells money because young people have to consume, they’re growing families,” Ho said. “That’s a huge advantage against the Vancouver market, which is more of a retirement market.”
While money has been migrating away from Vancouver during the past few months, the shift may not be a permanent exit, said Robert Veerman, a CBRE sales associate. People are still trying to understand what the long-term effects will be of the British Columbia government’s policies.
“It’ll be very volatile for awhile but right now there’s no panic in the market, just some jitters,” Ho said. “How the government works out the policies moving forward a year, two years from now if they haven’t stabilized the psyche of the market, then would panic set in? I don’t know.”