Greystar’s first fund close shows commitment to china rental housing

U.S. real estate developer and investor Greystar has attracted US$450 million for its China-focused rental housing fund, the latest sign of strong international demand for one of the country’s fastest-growing real estate markets.

February 25, 2019

Greystar announced the first close of the fund for its Asia-Pacific rental housing platform, Greystar Asia Pacific, with partners MIRA Real Estate, Bouwinvest Real Estate Investors, and Dutch fund managers APG Asset Management N.V.

The deal underlies “increasing foreign investor interest in China’s rental apartment sector on the back of strong leasing demand and a shortage of quality supply,” says Jim Yip, Head of Capital Markets at JLL China.

Demand from institutional investors for rental housing has been surging in China, where urban population growth is among the fastest in the world.

China is home to more than 200 million renters. Cities have attracted large numbers of workers from across the country, most of whom are young people with strong demand to rent living space on a long-term basis.

Supportive government policy, and greater cooperation among key market players, has also given the sector a boost.

“China is an extraordinarily compelling growth market for rental housing investment today and is notably lacking in quality housing for the wave of renter demand driven by the rapid growth of urban market populations and incomes,” said Wes Fuller, leader of Greystar’s Global Investment Management business.

The total stock of rental housing in six of China’s biggest cities – Beijing, Shanghai, Guangzhou, Shenzhen, Hangzhou and Chengdu – was 135,000 units as of last June, up from 15,000 units in 2015, according to data from JLL. A double shot of market growth and policy support has driven the shift.

By 2022, 750,000 newly completed rental units should enter the market in the above-mentioned six cities alone, according to the data.

To be sure, the Chinese multifamily sector is still in its infancy when compared to markets like the U.S. and Japan, where it is considered an investment-grade asset class due to stable returns, low cyclicality and ample liquidity.

But the entry of experienced international operators and long-term funds is likely to help accelerate China's rental housing development into a more mature phase, says Yip.

“With more long term capital investing into the sector, we expect to see more high quality and well-positioned projects enter to the market,” he says.