China’s commercial property deals will double in value to almost US$100 billion by 2030, CBRE predicts
- The property services giant forecasts that the transaction value could top 650 billion yuan (US$98.3 billion) in 2030, more than twice the current level
- Growth will be driven by an increase in capital from insurers, the emergence of more investment funds and the creation of real estate investment trusts
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.
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.
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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 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.
“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.
