Growth prospects in China remain strong, with real GDP growth expected to exceed 6.0% in 2018 and 2019.
Hong Kong, 28 June 2018 -- Colliers International (NASDAQ: CIGI; TSX: CIGI), a global leader in commercial real estate services, today launched a new China Investment Property report outlining new investment opportunities in China’s commercial property market.
Growth prospects in China remain strong, with real GDP growth expected to exceed 6.0% in 2018 and 2019. Monetary tightening has been modest and real interest rates may even fall slightly in coming years. These factors help explain why investment activity in China has stayed firm, with completed property deals up 24% YOY during Q1 2018.
“Nevertheless, economic risks are rising,” Andrew Haskins, Asia Head of Research at Colliers International, commented, “Concerns about a trade war have pulled China’s stock markets down 18-20%, and the renminbi has weakened. However, these risks have not hit commercial property prices. Valuations therefore look full: Grade A offices in Chinese Tier 1 cities yield 3.6-4.0%, barely above ten-year bonds.”
Shanghai business park assets are likely to see more investment growth than offices, with rent rising due to a growing high-tech sector and better infrastructure. Retail property also remains optimistic, which yields 4.0-6.5%. Logistics trends are bright, with rent and prices rising and assets available in outlying cities. Looking ahead, long-term rental apartments are emerging as an appealing new sector due to government efforts to promote the rental market.
Decentralised areas of Beijing still offer attractive office assets. Business parks offer appealing yields of 4.2-4.8%. Trends in logistics are positive; however, there is likely going to be more activity in cities such as Tianjin and Langfang due to lack of assets in Beijing. Logistics growth should benefit Shenyang, the hub of the North East.
South China is expected to attract more international investor interest as a result of the Greater Bay Area (GBA) initiative. In the office sector, Shenzhen is forecast to yield high rental growth, while Guangzhou’s Pazhou district is likely to develop into a new CBD attracting new office investment. Logistics assets are in short supply in Shenzhen and Guangzhou, therefore investors should turn to adjacent cities instead such as Dongguan and Foshan. Ample new retail supply will also create new opportunities in the long run.
West China continues to offer good value for investors. Grade A offices in Chengdu yield 5.7%, and the Financial Town area offers ample supply and strong policy support. There are also good opportunities in business park assets, which yield 7-8%, notably in South Hi-Tech district. Despite current scarcity of assets, Chengdu is rapidly growing into a key logistics hub. Looking ahead, further logistics development is expected to shift toward new areas east of the city.
To download a copy of the full report, visit here.
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