Biggest cities still preferred for office investments

By Cherry Cao | January 15, 2014, Wednesday |

Online Edition

TIER One cities, led by Beijing and Shanghai, remain preferred destinations for office investment in China despite the challenges of rather low net yields, according to CBRE, the world's largest commercial real estate services provider, after tracking 15 major Chinese cities.

Boasting stable returns with a low level of risk, underpinned by a well-developed market and resilient demand from foreign and domestic occupiers, Tier One cities, in general, rank higher in CBRE's MarketScore system.

The system is a strategic framework to evaluate real estate investment potential according to risks and returns.

The key challenge for most Tier One cities, however, is aggressive pricing, with net yields for office investments in these cities ranging from 4 percent to 5 percent.

"As economic and social development varies significantly across different Chinese cities, it can be challenging for investors to choose where to invest and where to buy," said Frank Chen, executive director and head of CBRE research China. "The scoring exercise aims to identify the most attractive real estate market from an investor perspective, based on fundamental drivers."

Across the 15 cities, Beijing topped the MarketScore ranking mainly due to its strong historical rental performance, low vacancy rate and limited future supply.

Shanghai, which placed second, performed well in the risk category due to strong net take-up and the highest investment liquidity.

Wuhan, a regional hub in central China which has been witnessing rapid economic growth, trailed closely in the third place though abundant future supply also poses a challenge of restrained rental growth in the near term, according to CBRE.

Business Real Estate

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Biggest cities still preferred for office investments

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