Wed, 30/01/2019 - 09:37
China's commercial real estate (CRE) investment hit a new record-high of RMB296 billion (approximately USD43.8 billion) in 2018, climbing a formidable 9.5 per cent over 2017, amid the country's clampdown on lending, impact of the prevailing trade frictions with the US and a cooling domestic economy.
That’s according to Cushman & Wakefield Research's latest Greater China Capital Markets Express report, which notes that active foreign capital demonstrated a clear preference for China's Tier-1 cities in 2018 where investment accounted for nearly 99 per cent of total foreign investment in China, at RMB94.6 billion (approximately USD13.9 billion), more than double the amount in 2017.
China's tough real estate lending environment created some excellent acquisition opportunities as vendors' expectations and supply pipelines softened. Strong end-user leasing demand also boosted the investment case.
Catherine Chen, Head of Forecasting & Capital Markets Research, Greater China at Cushman & Wakefield, says: "Prevailing trade frictions and ongoing economic cooling did little to quench foreign investors' appetite for property in mainland China. In 2018, RMB96 billion worth of investment was led by foreign investors, a 32 per cent share of major transactions. The U.S.-originated component of this totalled RMB14 billion (approx. USD2.1 billion).
"Foreign capital represented 45 per cent of total investment (foreign and domestic) in the Tier-1 cities, significantly up from the 25 per cent share in 2017. Shanghai was the primary target of foreign capital, recording RMB71.5 billion (approx. USD10.5 billion) in CRE investment in 2018, surging 78 per cent year on year. Shanghai's relatively high component of offshore structured assets proved attractive to international investors."
Cushman & Wakefield witnessed cash-strapped developers shift gears and restructure project pipelines to focus on residential developments. Many local players backed away from commercial development or even looked to dispose of commercial project companies to shore up balance sheets.
James Shepherd, Managing Director of Research, Greater China at Cushman & Wakefield, says: "Despite recent adjustments to the reserve ratio requirement, it seems unlikely that restrictions specifically on real estate debt are likely to be loosened in any significant way for at least the first six months of the year. Nevertheless, we forecast continued opening-up of the commercial property market to foreign investors and banks.”
"Cushman & Wakefield forecasts that Shenzhen, Guangzhou and Hong Kong are set to see increased demand through 2019. Beyond core cities of the Greater Bay Area, we also note strengthening interest in cities such as Zhuhai, Zhongshan, Foshan and Dongguan as well as key provincial capital cities.”
The report also offers insight from industry experts from various service lines at Cushman & Wakefield, including Gordon Marsden, Regional Director, Asia Pacific Capital Markets, and Sean Zhang, Head of Financial Advisory Services, China.
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