China’s commercial property deals will double in value to almost US$100 billion by 2030, CBRE predicts

Daniel Ren
·3-min read

China’s commercial property deals are expected to double in value over the next decade, buoyed by an increase in capital coming from insurers, the emergence of more investment funds and the creation of real estate investment trusts (Reits), according to CBRE.

The global property services firm forecasts in a research report that the transaction value of commercial properties – which includes office and retail spaces – could top 650 billion yuan (US$98.3 billion) in 2030, more than twice the current level.

China’s economy has shown its resilience in the post-Covid-19 world,” said Sam Xie, CBRE China’s head of research. “China will pioneer a global recovery while the commercial real estate market will see new opportunities.”

Get the latest insights and analysis from our Global Impact newsletter on the big stories originating in China.

The estimates, published during the third China International Import Expo (CIIE) in Shanghai that ends on Tuesday, added weight to bullish forecasts about the mainland’s economy after Beijing successfully contained the coronavirus.

CBRE said insurance funds worth at least 100 billion yuan would be allocated to commercial properties each year in the next decade.

Swire sells Cityplaza One for HK$9.85 billion after profit plunged

A rising number of real estate investment funds denominated in yuan will be another driving force behind an active property market.

CBRE said the total value of investible commercial properties across China would hit 80 trillion yuan by 2030.

The mainland Chinese economy, a lone bright spot worldwide, expanded 4.9 per cent in the third quarter, driven by an uptick in the services sector and consistent strength in trade and industry.

The economic data have helped to restore confidence among domestic and global businesses in the mainland’s vast market.

At the CIIE, most exhibitors said they wanted to expand their presence as consumer sentiment recovers.

The trade show, which started last Thursday, is seen as an important in-person event to underline China’s strong rebound from the Covid-19 pandemic, after other trade expos in the country have been held virtually or postponed.

“Business is business,” said You Liangzhou, owner of real estate agency Baonuo in Shanghai. “The rebound in the Chinese economy is attracting foreign companies, particularly consumer brands, to increase investment.”

During the National Day holiday between October 1 and 8, Shanghai’s 437 major retailers reported sales of 12.4 billion yuan, up 13.7 per cent from the previous year.

“Business confidence is improving and demand for office space turns out to be stronger than expected,” said Cathy Huang, JLL’s head of research in East China. “Shanghai is now the best example of how a metropolis can go back to a growth track with vigour and energy.”

In April, China issued a long-awaited pilot scheme for the creation of Reits, which is set to fuel trading in commercial properties since it boosts liquidity in the market.

Reits, which pay investors dividends from rents earned by underlying properties, are expected to provide cash-strapped developers with a new source of funding.

Before the Covid-19 pandemic originated in Wuhan in central China’s Hubei province in December, China’s office and commercial properties generated higher returns for investors than those in Western markets.

Annualised investment returns from an ideal property in a top-tier Chinese city like Shanghai could hit 10 to 12 per cent, including appreciation of the asset and yield based on rental income.

More from South China Morning Post:

This article China’s commercial property deals will double in value to almost US$100 billion by 2030, CBRE predicts first appeared on South China Morning Post

For the latest news from the South China Morning Post download our mobile app. Copyright 2020.