The commercial property sector in China is experiencing a surge in demand despite an overall slump in the real estate market. According to a report by property consultancy JLL, rents for prime retail locations in Beijing have seen a significant increase, with a 1.3% rise in the first three months of this year compared to the fourth quarter of 2023. This boost in demand can be attributed to the interest shown by new food and beverage brands, niche foreign fashion offerings, and electric car companies in renting storefronts in shopping malls.
Commercial real estate, which includes office buildings and shopping malls, forms only a small portion of China’s property market. However, there has been a notable increase in sales of offices and commercial-use properties, with a 15% and 17% rise, respectively, in floor area sold in January and February compared to the previous year. On the other hand, sales of residential properties have witnessed a decrease of nearly 25% during the same period, indicating a shift in the focus of property buyers towards commercial spaces.
Despite the challenges faced by the property market due to the pandemic, there are emerging opportunities for investors in China’s commercial real estate sector. Joe Kwan, managing partner at Raffles Family Office, sees potential in the market as prices are nearing an attractive buying point. Kwan stated in an interview that the firm is planning to start making deals in the second half of this year and into the next year, focusing on commercial properties in Shanghai and Beijing.
While the market may not be showing signs of a full recovery yet, there is optimism about the long-term prospects of China’s commercial real estate market. Kwan emphasized the importance of strategic investments in well-located, good-quality assets that have the potential to yield positive returns in the mid-term. He highlighted the size of China’s population, demographics, and consumption numbers as factors driving the positive outlook for the market.
Swire Properties, a Hong Kong-based company, has shared its intention to double its gross floor area in mainland China by 2032. The company currently operates high-end shopping complexes under the brand “Taikoo Li” in Beijing, Shanghai, and other major cities in China. Despite the challenges posed by the pandemic, Swire Properties has seen improvements in foot traffic and retail sales, surpassing pre-pandemic levels in most of its malls. The company expects 2024 to be a “year of stabilization” in terms of retail demand, signaling a positive trend for the commercial property sector in China.
China’s commercial property sector is experiencing a resurgence in demand, driven by various factors such as changing consumer preferences and strategic investments. While the market continues to face challenges, there are opportunities for investors to capitalize on the growth potential in commercial real estate, especially in key cities like Shanghai and Beijing. With a positive long-term outlook and expansion plans by major players in the industry, the future looks promising for China’s commercial property market.
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