Illuminated skyscrapers stand in the central business district at sunset on November 13, 2023 in Beijing, China.
VCG | China Optical Group | Getty Images
BEIJING – China's commercial real estate sector is witnessing pockets of demand amid a general decline in real estate.
Beijing is seeing rents for prime retail locations rise at their fastest pace since 2019, real estate consultancy JLL said in a report on Tuesday. Rents rose 1.3% during the first three months of this year compared to the fourth quarter of 2023, the report said.
Demand from new food and beverage brands, foreign specialty fashion shows and electric vehicle companies has helped drive interest in mall storefronts, according to JLL.
The company expects demand to continue throughout the year, helping to boost rents, which remain well below pre-pandemic levels.
Commercial real estate, which includes office buildings and shopping malls, makes up just a small portion of China's overall real estate market.
Sales of office and commercial-use properties rose 15% and 17%, respectively, by floor area, in January and February from a year earlier, according to Wind Information.
On the other hand, the data showed that the floor area of residential properties sold decreased by about 25% during that period. Commercial and residential real estate sales declined for most of last year, according to Wind.
Movement restrictions due to COVID-19 have also reduced demand for commercial real estate in China, in line with global trends. However, the Chinese economy took longer than expected to recover from the pandemic, amid a broader decline in the real estate market.
Get cheap enough to buy
Commercial property prices in China are approaching an attractive buying point, said Joe Quan, managing partner at the Singapore-based Raffles Family Office, in an interview last week.
“We have an internal timeline or forecast for how far the valuation has to drop before it makes it attractive to us,” he said. “I think the opportunity is about to open up for us now.”
Cowan said he expects to start concluding deals in the second half of this year and into next year. The company is primarily eyeing commercial properties in Shanghai and Beijing.
Such bargain hunting is not necessarily a sign that the market is on its way to a full recovery.
“What we are noticing is that owners are offering us the same opportunities, some of the same portfolios, but at deeply discounted prices on a quarterly basis,” he said. “So this gives us a general sense that we still have some way to go before we can see the bottom.”
“We still have a very positive outlook on China's long-term prospects, given the size of its population, given its demographics, given its consumption numbers,” Kwan said. “I think right now it's going through a phase where it might overcorrect and people might miss out on the opportunity to get some really well-positioned, high-quality assets that are going to prove to be winners, maybe not right now. In the next two or three years, but at least in Medium term.
Based in Hong Kong Swire Properties It said in its report last month that it intends to double its gross floor area in mainland China by 2032. The company currently operates upscale shopping complexes under the “Taikoo Li” brand in Beijing, Shanghai and other major cities in China.
“In mainland China, traffic has improved significantly and retail sales have exceeded pre-pandemic levels in most of our malls since the pandemic-related restrictions were lifted. Our office portfolio has proven its resilience despite the weak office market,” Swire CEO Tim Blackburn said in a statement. the report.
Looking ahead, the company expects 2024 to be a “year of stability” in retail demand.
