Illuminated skyscrapers stand in the central business district at sunset on November 13, 2023 in Beijing, China.
VCG | Visual Group China | Getty Images
BEIJING — China’s commercial real estate sector is seeing pockets of demand amid a global real estate crisis.
The capital Beijing is seeing rents for prime commercial locations rise at their fastest pace since 2019, real estate consultancy JLL said in a report on Tuesday. Rents increased by 1.3% in the first three months of this year compared to the fourth quarter of 2023, the report said.
Demand from new food and beverage brands, niche foreign fashion offerings and electric car makers has helped drive interest in mall storefronts, according to JLL.
The company expects demand to persist throughout the year, helping to boost rents, which remain well below pre-pandemic levels.
Commercial real estate, which includes office buildings and shopping malls, represents only a fraction of China’s overall real estate market.
Office and commercial property sales increased 15% and 17%, respectively, by floor space, in January and February from a year earlier, according to Wind Information.
In contrast, the floor space of residential properties sold fell by almost 25% during this period, according to the data. Commercial and residential property sales fell for much of last year, according to Wind.
Covid-19 travel restrictions have also reduced demand for commercial real estate in China, in line with global trends. However, the Chinese economy has taken longer than expected to recover from the pandemic, amid a broader recession in the property market.
Be cheap enough to buy
Commercial real estate prices in China are nearing an attractive buying point, Joe Kwan, Singapore-based managing partner of the Raffles Family Office, said in an interview last week.
“We have an internal timeline or projection of how far the valuation needs to fall before it makes it attractive to us,” he said. “I think the opportunity is about to open up for us right now.”
Kwan said he plans to start closing deals in the second half of this year, continuing into next year. The company is mainly interested in 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 observed was that owners offered us the same opportunities, some of the same portfolios, but at a very discounted price on a quarterly basis,” he said. “So from there it gives us the general feeling that it will still be a while before we can see the bottom.”
“We still have a very positive view of China’s long-term outlook, given its population size, demographics and consumption figures,” Kwan said. “I think right now we’re going through a period where the correction could be excessive and people could miss the opportunity to acquire some really great location, good quality assets that will turn out to be winners, maybe -not be in the future.” in the next two or three years, but at least in the medium term. »
Based in Hong Kong Wire Properties said in its report last month that it aims to double its gross floor space in mainland China by 2032. The company currently operates high-end shopping complexes under the “Taikoo Li” brand in Beijing, Shanghai and in other major cities in China.
“On the Chinese mainland, foot traffic has significantly improved and retail sales have exceeded pre-pandemic levels for most of our shopping centers since the lifting of pandemic restrictions. Our office portfolio has proven resilient despite the weakness in the office market,” Swire chief executive Tim Blackburn said in the report.
Looking ahead, the company expects 2024 to be a “year of stabilization” for retail demand.
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