International investors who poured billions of dollars into China real estate are increasingly looking to sell their properties at steep losses, threatening more pain for a sector that has weighed heavily on Asia's largest economy.

Since late 2024, investment managers including BlackRock Inc. and Carlyle Group have offloaded commercial buildings in the country that sold for far less than what they originally paid, causing banks that financed the assets to lose money as well. More global institutions are looking to divest their Chinese properties, said dealmakers and bankers who asked not to be identified discussing private information. HSBC Holdings Plc, Standard Chartered Plc and other lenders have also warned of higher defaults on their China real estate loans.

Foreign property buyers invested close to $140 billion into office towers, warehouses, shopping malls and data centers in China in the last 15 years, according to data compiled by MSCI Real Capital Analytics. Investors thought they would profit from a long-lasting surge in demand from businesses looking for space, but that turned out to be a miscalculation. An unprecedented supply glut is causing rents to fall and values of many properties to tumble, in some cases to below prices seen a decade ago.

Distressed sales of China commercial real estate assets totaled 114 billion yuan ($16 billion) over 2023 and 2024, and made up a record 22% of total transactions last year, according to a report by Bloomberg Intelligence. A distressed sale occurs when there is a loan default or when a seller loses control of an asset.

The problem now is that the longer property owners wait to sell out, the bigger their losses are likely to become. Capital values, or the estimated market values, of Beijing and Shanghai offices — which make up a large chunk of foreigners' real estate purchases — have plunged at least 40% from 2019, according to investors and bankers actively involved in deals.