China’s Commercial Property Sector Sees Pockets of Demand Amid Real Estate Slump
In the midst of an overall real estate slump, China’s commercial property sector is experiencing pockets of demand that are catching the attention of investors. The capital city of Beijing, in particular, has seen rents for prime retail locations rise at their fastest pace since 2019, according to a report by property consultancy JLL.
What’s driving this increased interest in shopping mall storefronts? Demand from new food and beverage brands, niche foreign fashion offerings, and electric car companies are helping to fuel the growth. JLL expects this demand to persist throughout the year, which could ultimately boost rents that are currently below pre-pandemic levels.
While commercial real estate only makes up a fraction of China’s overall property market, recent data suggests that sales of offices and commercial-use properties have risen significantly compared to sales of residential properties. This shift in demand can be attributed to various factors, including Covid-19 restrictions on movement and the broader economic slump China has experienced.
As prices for commercial real estate in China approach attractive buying points, investors like Joe Kwan from Raffles Family Office see an opportunity on the horizon. Kwan anticipates making deals in the second half of this year through next year, primarily focusing on commercial properties in Shanghai and Beijing. This bargain-hunting mindset is indicative of a potential market recovery, but investors remain cautious as they wait for the right moment to strike.
Companies like Swire Properties are also eyeing opportunities in mainland China, with plans to double their gross floor area by 2032. Their high-end shopping complexes in cities like Beijing and Shanghai have seen an uptick in foot traffic and retail sales, giving them confidence in the resilience of their office portfolio.
Looking ahead, Swire Properties expects 2024 to be a “year of stabilization” in retail demand, signaling a potential turning point for China’s commercial property sector.
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