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Rabu, 06 November 2019 05:41:00

Mainland China Commercial Property Investment Strengthened in Q3, Driven by Return of Domestic Buyers

Deals over RMB 100 million up 28% on prior quarter
HONG KONG, RIAUONE.com - 5 November 2019 - Investment volume in Mainland China's commercial real estate (CRE) investment market strengthened in Q3, with deals over RMB 100 million totaling RMB 49.7 billion, up 28% q-o-q, according to Cushman & Wakefield Research's latest Greater China Capital Markets Express report. However, when compared with last year's peak levels, the total investment level in the CRE market in Q3 was down 28% y-o-y.
 
Catherine Chen, Head of Capital Market Research, Greater China at Cushman & Wakefield and author of the report, commented: "A notable shift was the return of domestic buyers, who took more than 90% of the quarter's investment volume, with a dominant advantage in acquiring publicly auctioned assets and pre-distressed assets. We also witnessed an increase in demand from owner-occupiers in acquiring office assets, largely domestic investors."
 
James Shepherd, Head of Research, Asia Pacific at Cushman & Wakefield, stated: "The government's clampdown on real estate developer financing does present opportunities for international investors in the Mainland China market, yet, despite this, we have seen a significant slide in transaction volume over the past two quarters. Headwinds from trade tensions, coupled with the weakening yuan, have created increasing challenges for international investors. However, we still see significant interest from investors from Hong Kong China and Singapore, and we expect considerable pent-up demand to be released once greater certainty around the RMB exchange rate becomes more apparent."

Over the first three quarters, Hong Kong-based investors have deployed an impressive RMB 16.3 billion, followed by investors from Singapore who have invested RMB 9.6 billion into Mainland China's CRE market. Notable deals have included Hong Kong-based Link REIT's acquisition of Shenzhen's Central Walk for RMB 6.6 billion. Singapore-based Keppel has made multiple purchases, including Yi Fang Tower in Shanghai, Zhongguancun Neo in Beijing, a joint investment into Westmin Plaza in Guangzhou, and most recently in Q4, Ronsin Technology Center via Alpha Investment Partners.

The office sector represented 55% of the quarter's investment, primarily driven by a few large transactions in Beijing, namely the purchases of Lize Plaza, Pangu Plaza and HNA Plaza, all by domestic buyers. Nonetheless, excluding Beijing, office investment volume (including office space in mixed use developments) weakened in most of the Tier One and Tier Two cities tracked by Cushman and Wakefield. The weakening investment was primarily due to softening office leasing demand, as net absorption levels for the first three quarters of 2019 were down 56% and 58% in comparison to the same period in 2017 and 2018, respectively.
 
Contributing factors to the weakening demand in the office leasing sector included slower expansion of co-working operators and financial services companies, and a general cost-saving strategy adopted by most tenants given ongoing trade tensions and a slowdown in economic growth. (roc/red/*) #for information on collaboration publications, questions and other e-mails riauonemedia@gmail.com
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