With China Eastern Airlines’ new direct service to Shanghai (approximately 23 million people), it is inevitable that Hawaii will see our fair share of investors as these well-heeled visitors arrive. Investments in China over the past four years (while the rest of the world was in the great recession) has fared very well. Returns on all property types have been exceptional but things are starting to slow. Institutional grade properties with major office building or shopping center components are matching the low cap rates we are seeing in gateway – 24 hour cities in the US. With cap rates ranging from 2 – 4.5%, investors will look to other markets.
This week in China, housing prices decreased for the first time in history. Commercial real estate returns are in question. Raw materials and heavy infrastructure investments have driven the economy the past 10 years. The government of China is pushing an agenda to increase consumer spending. All this will naturally lead to more international travel.
So far in Hawaii, we worked with travel related companies who are targeted Waikiki hotels. As the market matures and visitors spend more time with us, we will see an expansion of that interest to major construction companies interested in large resort projects. Next, we will experience individuals who purchased homes and will graduate to medium-sized commercial real estate in Hawaii.