Investors are piling into China’s offices, shops and retail space, defying spending slumps across Asia-Pacific real estate markets
- Second-quarter investment volume jumped 95 per cent to US$8.4 billion compared with last year, according to data by Real Capital Analytics (RCA)
- First-half volume fell 23 per cent from last year to US$14 billion, owing to nationwide quarantines to contain the coronavirus outbreak in the first three months
Property buyers piled into China’s commercial and retail real estate in the three months ended June even as the country was barely out of its coronavirus outbreak, outpacing demand across the rest of the Asia-Pacific region, according to a report.
Second-quarter investment volume jumped 95 per cent to US$8.4 billion compared with last year, according to data by Real Capital Analytics (RCA). First-half volume fell 23 per cent from last year to US$14 billion, owing to nationwide quarantines to contain the coronavirus outbreak in the first three months of 2020, the data showed.
“There was one stand-out market in the Asia-Pacific that roared back to life in the second quarter,” said the New York-based research firm, which tracks deals worth at least US$10 million. “ Investment in China nearly doubled from last year , reversing a slump of more than 50 per cent in the previous quarter.”
The world’s most populous nation was the first major economy to enter into, and emerge from, the 2020 coronavirus lockdown. With an estimated 80 per cent of manufacturing back on line, the world’s second-largest economy eked out a 3.2 per cent growth in the three months ended June, giving a much-needed boost to the real estate market.
“Throughout 2020, China’s deal count consistently tracked above last year, underscoring how little the [corona]virus has disrupted real estate investment across the country,” RCA said. “Office, retail, and industrial sales volume in China all grew in the second quarter.”
Growth in China occurred in stark contrast to declines in nine other markets across the Asia-Pacific region, where Hong Kong led a region-wide slump of between 23 and 80 per cent.
“Real estate investments held up much better in the bigger markets than secondary ones in Asia-Pacific in the second quarter,” said RCA’s Asia-Pacific managing director David Green-Morgan. “This was particularly true in China as extended lockdowns were limited in Beijing and Shanghai, as well as in Japan and South Korea where headline numbers for completed deals didn’t reflect the resilience of underlying activity on deals likely to close in the second half.”
The robust investments in China were helped by Singapore’s sovereign wealth fund GIC, which paid US$1.13 billion in February to buy the LG Twin Towers office building in Beijing, with 889,891 square feet (82,673 square metres) of space.
Other major transactions were domestic investors buying assets in China, such as Bank of Shanghai's acquisition of the Greenland Bund Center T2 office building in Shanghai for US$687 million, and Ping An Insurance's purchase of Gopher Center Shanghai for US$600 million.
Investors were buying office buildings in China, even as a debate raged on over the future of offices, as the Covid-19 pandemic triggered a work-from-home arrangements for many companies.
“Office investors don’t seem to be holding back in China, with nine buildings priced over US$250 million changing hands in the quarter alone,” RCA said.
For London-based real estate investment manager Nuveen Real Estate, China's overall real estate market outlook is neutral as heightened tensions with the US are still likely to impact trade prospects.
“China’s V-shape recovery is holding firm, with July exports posting a strong rebound even as trade uncertainties is likely to persist on worsening US-China geopolitical tensions,” according to Nuveen’s latest report.