Concrete Analysis | Strong domestic property players in China take centre stage

As the downward pressure on China’s economy persist, the Central government’s fiscal easing measures and continued easing of monetary policy remain very much in place.

While on a national scale, growth in fixed asset investment continues to slow, the third quarter witnessed a substantial ramp-up of real estate investment transactions in the leading cities which we survey. Most notably, these included the sale of two prime tenanted office towers in Shanghai and a major unfinished mixed use complex in central Beijing.

As a consequence of the size of these deals, total investment in buildings rose to US$7.1 billion in the third quarter 2015, rising by threefold over the previous quarter. The third quarter also witnessed three major investment deals done at the entity level, of which two involved property portfolios situated in Chengdu.

However, what was really noteworthy in the third quarter was not only the large size of some of the investments transacted, but the broad spectrum of sentiment which persists about the China real estate market and the equally wide range of strategies which have been honed by incoming players to take advantage of the prevailing mixed sentiment.

On the one hand, several overseas PE funds, most notably Morgan Stanley and AM Alpha, were net sellers of assets in the market this quarter, these two funds disposing of three prime commercial assets in Shanghai between them .

At the same time, other overseas institutions and especially a number of listed REITs, remained key investors in tier 1 commercial investment properties. Within the quarter, ink REIT followed its first quarter acquisition of EC Mall in Beijing with the acquisition of Shanghai Corporate Square Towers 1 &2.