Illuminated skyscrapers stand in the central business district at sunset on November 13, 2023 in Beijing, China.
VKG | Visual China Group | Getty Images
BEIJING — China’s commercial real estate sector is seeing pockets of demand amid a general slowdown in the real estate market.
The capital Beijing is seeing rents in prime retail outlets rise at the fastest pace since 2019, property consultancy JLL said in a report on Tuesday. Rents rose 1.3% in the first three months of this year compared with the fourth quarter of 2023, the report said.
Demand from new food and drink brands, niche overseas fashion offerings and electric vehicle companies has helped boost interest in mall storefronts, according to JLL.
The firm expects demand to continue throughout the year, helping to boost rents, which remain well below pre-pandemic levels.
Commercial real estate, including office buildings and shopping malls, makes up only a portion of China’s overall real estate market.
Office and commercial property sales rose 15% and 17%, respectively, by area in January and February from a year earlier, according to Wind Information.
On the contrary, according to the data, the area of residential real estate sold during this time fell by almost 25%. Sales of both commercial and residential properties fell for much of last year, according to Wind.
Travel restrictions due to Covid-19 have also reduced demand for commercial real estate in China, in line with global trends. However, China’s economy has taken longer than expected to recover from the pandemic amid a broader slump in the property market.
Cheap enough to buy
Commercial property prices in China are approaching an attractive buying point, Joe Kwan, managing partner of Singapore-based Raffles Family Office, said in an interview last week.
“We have an internal schedule or forecast of how far the valuation has to fall before it becomes attractive to us,” he said. “I think that opportunity is about to open up for us right now.”
Kwan said he expects to start doing deals in the second half of this year, well into next year. The firm primarily considers commercial real estate in Shanghai and Beijing.
This kind of bargain hunting isn’t necessarily a sign that the market is on track for a full recovery.
“We are seeing that the owners [have] gave us the same capabilities, some of the same portfolios, but at a significantly reduced price on a quarterly basis,” he said. “So it gives us a general feeling that there is still some way to go before that happens.” We see the bottom.”
“We continue to have a very positive view of China’s long-term prospects given its population size, its demographics and its consumption performance,” Kwan said. “I think it’s going through a period now where it may overcorrect and people may miss out on the opportunity to buy really, really well positioned, quality assets that will turn out to be winners, maybe not in the next two to three years, but at least , in the medium term.”
Hong Kong Wire properties said in his report Last month, the company said it aims to double its total footprint in mainland China by 2032. The company currently operates luxury shopping complexes under the Taikoo Li brand in Beijing, Shanghai and other major cities in China.
“On the Chinese mainland, footfall has improved significantly and retail sales at most of our shopping centers have exceeded pre-pandemic levels since pandemic-related restrictions were lifted. Our office portfolio has proven resilient despite the weak office market,” Tim Blackburn said in a statement from Swire CEO.
Looking ahead, the company expects 2024 to be a “year of stabilization” for retail demand.