Foreign companies’ investment in Chinese commercial property on the rise
January 29, 2019 Category China News Round-up, Weekly
Foreign investors have significantly increased their presence in China’s commercial real estate sector, investing CNY78 billion last year, a record since 2005 and up 61.5% year-on-year. Throughout 2018, commercial real estate transactions hit a record high of CNY251.7 billion, up 4% year-on-year, according to a report on China’s 2019 property market outlook by global real estate consultancy CBRE. Foreign capital flows into the sector increased from CNY26 billion in 2016 to CNY48.3 billion in 2017. The central authorities’ deleveraging campaign has tightened domestic financing channels and affected domestic investors’ financing capacity, said Jim Yip, head of capital markets for JLL China. International investors are embracing more opportunities to secure deals amid weaker competition from their domestic counterparts, said James Macdonald, Senior Director of Savills China Research.
According to JLL’s data, 56% of the nation’s commercial property investment went to Shanghai, which is considered a stable and long-term investment destination among investors both from home and abroad. Both of the two largest deals made by foreign investors last year took place in Shanghai. These were CapitaLand’s and Singapore sovereign wealth fund GIC’s purchase of Shanghai’s tallest two towers at Harbor 55, and Blackstone’s purchase of Mapletree Business City. The former deal, which cost CapitaLand and GIC CNY12.8 billion, is also the biggest single purchase CapitaLand has made in the Chinese mainland so far. Blackstone’s new property is an office and retail complex, costing CNY8.3 billion. Compared to 2017, foreign investors became more proactive last year, and they will maintain that momentum this year, said Yip with JLL. In the 2019-24 period, an estimated USD35 billion will be invested in high value-added and opportunist properties in the China market, said Xie Chen, head of research at CBRE China. It is expected that in the short term, China will not expand financing channels for domestic real estate companies, but large companies will have the advantage in securing loans.
“Faced with high repayment pressure, domestic property owners are expected to have to offload their properties to pay down debt. The market is forecast to see a price correction in 2019, when sellers become more pressured to sell properties in the slow market,” Savills’ Macdonald said. In addition to the conventional foreign capital investment destinations of Beijing and Shanghai, which attracted 85% of foreign investment in 2018, the Hong Kong-Zhuhai-Macao Bridge, opened late last year, will boost the Guangdong-Hong Kong-Macao Greater Bay Area by attracting more attention from property investors, the China Daily reports.
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