Illuminated skyscrapers stand in the central business district at sunset on November 13, 2023 in Beijing, China.
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BEIJING – China’s commercial real estate sector is seeing demand amid a general real estate slump.
In the capital Beijing, rents for prime retail locations are rising at the fastest rate since 2019, real estate consultancy JLL said in a report on Tuesday. Rents rose 1.3% in the first three months of this year compared to the fourth quarter of 2023, the report said.
JLL said demand from new food and beverage brands, niche foreign fashion offerings and electric car makers has helped drive interest in mall storefronts.
The company expects demand to continue throughout the year, contributing to an increase in rents that are well below pre-pandemic levels.
Commercial real estate, which includes office buildings and shopping malls, represents only a fraction of China’s total real estate market.
According to Wind Information, sales of office and commercial properties by area rose 15% and 17%, respectively, in January and February compared to a year ago.
In contrast, the floor space of residential properties sold fell nearly 25% during the period, the data showed. Sales for both commercial and residential properties were down for most of the past year, Wind said.
Movement restrictions due to Covid-19 had also reduced demand for Chinese commercial real estate, in line with global trends. However, it took longer than expected for China’s economy to recover from the pandemic amid a general slump in the real estate market.
Become cheap enough to buy
Commercial property prices in China are nearing an attractive buying point, Joe Kwan, managing partner at Singapore-based Raffles Family Office, said in an interview last week.
“We have an internal timeline or forecast of how far the valuation needs to fall before it becomes attractive to us,” he said. “I think we have an opportunity right now.”
Kwan said he expects to begin trial in the second half of this year through next year. The company primarily examines commercial properties in Shanghai and Beijing.
Such bargain hunting is not necessarily a sign that the market is on the path to a full recovery.
“What we have observed is that owners [have] “We’ve been presented with the same opportunities, some of the same portfolios, but at a heavily discounted price on a quarterly basis,” he said. “So we have a general feeling that it will take a while longer for us to see the bottom forming.”
“In the long term, we are still very positive about China, given its population size, its demographics and its consumption figures,” Kwan said. “I think it’s going through an area right now where there could be an overcorrection and people could miss the opportunity to acquire some really, really well-located, high-quality assets that will prove to be winners, maybe not in the future.” in the next two to three years, but at least in the medium term.
Based in Hong Kong Swire properties said in its report last month that it aims to double its gross floor area in mainland China by 2032. The company currently operates high-end shopping complexes under the “Taikoo Li” brand in Beijing, Shanghai and other major cities in China.
“In mainland China, foot traffic has improved significantly and retail sales have exceeded pre-pandemic levels in most of our malls since pandemic-related restrictions were lifted. Our office portfolio has proven resilient despite a weak office market,” Swire CEO Tim Blackburn said in the report.
Looking forward, the company expects 2024 to be a “year of stabilization” in retail demand.
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2024-04-11 00:29:53
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