Some bright spots emerge in China’s commercial real estate sector | Private Equity Weekly

BEIJING – China’s commercial real estate sector is seeing some demand amid an overall real estate downturn.

Rents for prime retail stores in the capital Beijing are rising at the fastest pace since 2019, real estate consultancy JLL said in a report on Tuesday. Rents increased 1.3% in the first three months of this year compared with the fourth quarter of 2023, the report said.

JLL said interest in mall stores was driven by demand from new food and drink brands, niche foreign fashion products and electric vehicle companies.

The company expects demand to persist throughout the year, helping to boost rents, which remain well below pre-pandemic levels.

Commercial real estate, including office buildings and shopping malls, accounts for only a small portion of China’s overall real estate market.

Data from Wind Information shows that sales of office buildings and commercial buildings in January and February increased by 15% and 17% respectively in terms of construction area compared with the same period last year.

In contrast, data shows that residential sales fell by nearly 25% during the same period. Sales of commercial and residential properties fell for much of last year, Wind data shows.

Covid-19 restrictions on movement of people have also reduced demand for commercial real estate in China, in line with global trends. However, China’s economy is taking longer to rebound from the epidemic than expected amid a generally sluggish real estate market.

Joe Kwan, managing partner of Raffles Family Office in Singapore, said in an interview last week that commercial real estate prices in China were approaching an attractive buying point.

“We do have an internal timeline or forecast of how much the valuation has to come down for it to be attractive to us,” he said. “I think the opportunity is opening up for us right now.”

Kwan said he expects transactions to begin in the second half of this year and into next year. The company mainly focuses on commercial real estate in Shanghai and Beijing.

This bargain hunting does not necessarily indicate a full market recovery.

“We’ve been observing that owners are offering us the same opportunities, some of the same portfolios, but at a significant discount every season,” he said. “So that gives us a general sense that it’s going to be a while before we see a bottom.”

“We still have a very positive view on China’s long-term prospects, given its population size, demographics and consumption data,” Guan said. “I think right now it’s going through an area where it may have overcorrected and people may be missing out. The opportunity to acquire some real, well-located, high-quality assets that will prove to be winners, maybe not in the next two to three years, but at least in the medium term.”

Stationed in Hong Kong Swire Properties which says Report Last month, the company planned to double its total floor space in mainland China by 2032. The company currently operates high-end shopping malls under the “Taikoo Li” brand in Beijing, Shanghai and other major cities in China.

“Since pandemic-related restrictions were lifted, foot traffic has improved significantly in mainland China and retail sales have exceeded pre-pandemic levels. Despite a soft office market, our offices have proven to be The investment portfolio is resilient,” Swire Group CEO said in the report.

Looking ahead, the company expects 2024 to be a “stable year” for retail demand.