China’s commercial real estate investment hits record high

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Cushman & Wakefield has released its latest Greater China Capital Markets Express report. According to the report, commercial real estate (CRE) investment in China increased to a record RMB296 billion (approx. US$43.8 billion) in 2018, climbing a formidable 9.5% over 2017, amid the country’s clampdown on lending, impact of the prevailing trade frictions with the U.S. and a cooling domestic economy.

Accordig to the report, foreign investors preferred the China’s Tier-1 cities in 2018 to invest in commercial real estate market which accounted for RMB94.6 billion (approx. US$13.9 billion).

Catherine Chen, Head of Forecasting & Capital Markets Research, Greater China at Cushman & Wakefield, said: “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% share of major transactions. The U.S.-originated component of this totaled RMB14 billion (approx. US$2.1 billion).”

Chen added, “Foreign capital represented 45% of total investment (foreign and domestic) in the Tier-1 cities, significantly up from the 25% share in 2017. Shanghai was the primary target of foreign capital, recording RMB71.5 billion (approx. US$10.5 billion) in CRE investment in 2018, surging 78% y-o-y. Shanghai’s relatively high component of offshore structured assets proved attractive to international investors.”

James Shepherd, Managing Director of Research, Greater China at Cushman & Wakefield, said: “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.”

Shepherd added: “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.

Source: C&W