Foreigners’ return boosts real estate investment
Print Edition
Shanghai’s real estate investment market is expected to remain very strong this year, after chalking up a record 2013 as overseas buyers returned.
Commercial property transactions in Shanghai last year reached an all-time high of 56.7 billion yuan (US$9.3 billion), according to Jones Lang LaSalle. That was more than double the volume of 2012 and surpassed the previous high of 46.4 billion yuan set in 2011.
“Overseas investors seemed to regain their appetite for local properties, while financial institutions were the most active among domestic investors,” said Jim Yip, managing director of investment and advisory service at DTZ China. “Office buildings remained the most sought-after property.”
For the full year, overseas buyers comprised about 48 percent of the en-bloc investment market in Shanghai. Office properties accounted for 59 percent of transactions, according to Jones Lang LaSalle.
Looking ahead, robust demand in Shanghai is expected to continue, fueled by foreign capital and domestic financial institutions, including banks and insurance companies seeking assets in Tier-1 cities.
“We are seeing a steady increase in liquidity in the China market and anticipate transaction volume to remain strong,” noted Alan Li, head of investment for Jones Lang LaSalle Shanghai.
“In particular,” he said, “we have noticed a two-tier market emerging in terms of investor behavior in Shanghai. Foreign investors are becoming slightly more cautious due to slowing rental growth and a gradual increase in offshore interest rates because of monetary policy in the US. Domestic owner-occupiers remain willing to pay very high prices for office assets in core locations.”
Deals concluded in the last quarter of 2013 probably underlined this trend. In the city’s largest-ever office transaction, Oriental Financial Center, a Cheung Kong and Hutchison Whampoa development in the heart of the financial district of Lujiazui in Pudong, was sold for approximately 7.1 billion yuan to Bank of Communications and China Everbright in October.
Offices in secondary locations, such as Hongqiao and North Bund areas, are also attracting growing attention, and logistics properties could emerge as another magnet for investors in 2014.
“Although the last quarter of 2013 didn’t see any major sales transactions in the logistics sector, we expect to see robust investment demand moving forward,” Li said.
Recent fundraising activities include Global Logistic Properties’ establishment of a US$3 billion fund to invest in about 1.8 million square meters of warehouse space in China and Alibaba’s US$361 million investment in Haier to expand warehouse capacity and the inland distribution network.
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