SHANGHAI—The upswing in the U.S. property market is attracting Chinese developers and investment firms, and they are dipping their toes into new cities.

While Chinese institutional investors are still drawn to their traditional favorites of New York, Los Angeles and San Francisco, many are now also headed to cities such as Houston, Boston and Seattle as they seek geographic diversity as well as bigger lot sizes.

These other cities—lesser known to some Chinese firms—now appear to offer fresh opportunities as energy or technology drives their economies and local Chinese communities expand.

    In the second quarter of this year, Beijing-based real-estate investment firm Grand China Fund took an 80% stake in a 286-unit residential rental complex in Houston. That followed a 2012 investment in a 170-unit residential project in Atlanta, with another local partner. The firm put a total of about $15 million into the two projects, which are valued at more than $50 million. For both projects, it said it was attracted by the prospect of higher yields amid the lower prices compared with property in California and New York.

Gaw Capital Partners, a Hong Kong-based private-equity firm, is planning to raise $500 million for a real-estate fund that will invest in U.S. commercial property in the fourth quarter, targeting investors from Asia and North America. The fund manager said it will look at assets in "innovation centers" such as Portland, Ore., and Austin, Texas.

China Vanke Co., 000002.SZ -0.74% the country's largest property developer by market capitalization, is interested in investing in Boston, partly because of its sizable Chinese community, said the firm's president, Yu Liang, at a news briefing in Hong Kong last month, without providing further details. Vanke had already jointly invested in a 655-unit high-end condominium in San Francisco with U.S. developer Tishman Speyer earlier this year.

Chinese investors still are eyeing assets in New York and San Francisco, "but we are also witnessing increased interest in cities like Washington, D.C., Boston, Houston, Seattle and Chicago," said Alistair Meadows, who oversees cross-border Asian-Pacific real-estate transactions at consultancy Jones Lang LaSalle JLL -1.20% . "Cities like Seattle and Houston are enjoying strong job growth driven by the technology and energy sectors. As a consequence, core office investments in these cities offering higher yields are proving attractive."

Slower domestic economic growth in China as well as rising risks in the country's financial sector are prompting investors to look abroad. The U.S. has become the most popular real-estate market to invest in so far this year for Chinese firms, followed by Hong Kong, the U.K., Macau and Singapore, according to data tracker Dealogic.

Chinese property investors—from big players like sovereign-wealth funds and insurers to smaller ones such as local fund managers—are attracted to the U.S. market in general because of the economic recovery, ample market liquidity, and the stability of returns, real-estate consultants say. Rental properties in the U.S. typically have longer leases compared with China's, and hence are less prone to disruptions or volatility.

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    Tishman Speyer

    China Vanke invested in a condo project in San Francisco earlier this year.

    Acknowledging that Houston and Atlanta aren't usually the first places Chinese investors think of when investing in the U.S., Zhang Mingeng, board chairman at Beijing's Grand China Fund, cites costs as a key attraction. He said prices of some projects in these areas are still down around 20% from their peaks, and that growth prospects in these cities are positive.

"Our investors, which include lawyers, exporters, merchants, accountants, have U.S. incomes and want us to branch into the U.S. for diversification," Mr. Zhang said. "They are looking for safe assets that they can see and touch." Grand China Fund manages yuan-denominated funds totaling four billion yuan ($653 million) investing in Chinese real estate, and a $60 million dollar-denominated fund investing in the U.S.

Houston, in particular, has become more familiar to Chinese investors. China Petrochemical Corp., known as Sinopec, has operations there, and the city gained recognition with Chinese investors with the help of former Chinese basketball star Yao Ming, who played for the Houston Rockets.

Mr. Zhang said he is looking for more real-estate projects in Miami, Orlando, Dallas and San Diego, in addition to New York and Chicago.

"While the returns from the U.S. are not as high as what we get in our mainland China projects, they are good enough," he said, declining to reveal the investment yield of his U.S. projects. "We like residential projects near universities, hospitals and military bases."

Asset managers said investors who aren't eager to place all their eggs in one basket are looking for diversity, not just in asset classes, but also in their geographic footprint.

"The large Asian institutional investors, including Chinese investors, are looking for safety, more stability and exposure to diversified currencies and returns," said Goodwin Gaw, chairman of Gaw Capital Partners, which also provides outbound-investment advisory services to Asian institutional investors.

To be sure, foreign investment in the U.S. still makes up a small portion of the market. Around 15% of the $25 billion invested in New York's real-estate market in 2012 was from foreign investors, for instance, compared with 75% of the $24 billion invested in London in 2012, according to data from Jones Lang LaSalle.

Not all Chinese investors are branching out. The coastal cities in the U.S. still attract plenty of Chinese investors, with deals this year such as Greenland Holdings Group's $1 billion investment in a mixed-use project in downtown Los Angeles, and Soho China Ltd. Chief Executive Zhang Xin's personal investment in a stake in the General Motors Building in New York, which attracted considerable media attention in China.

Beijing-based property developer and investor Feng Lun, chairman of Vantone Holdings Co., said he is sticking to investing in New York City. Vantone has leased 20,000 square meters of space in One World Trade Center, and has invested in joint ventures in two residential projects in the city.

"We'll focus on New York City, preferably Manhattan, to ensure our current operations are successful before branching to other cities," Mr. Feng said.

Write to Esther Fung at esther.fung@dowjones.com