China’s commercial property sector is experiencing a mixed outlook amidst an overall real estate slump. Beijing, the capital city, is seeing rents for prime retail locations rise at the fastest pace since 2019, driven by demand from new food and beverage brands, foreign fashion offerings, and electric car companies. Despite this increase, rents remain below pre-pandemic levels. Commercial real estate, including office buildings and shopping malls, comprises only a fraction of China’s overall property market. Sales of offices and commercial properties have seen an uptick, while residential property sales have declined, reflecting a broader trend in the market.
As prices for commercial real estate approach a potentially attractive buying point, investors like Joe Kwan from Raffles Family Office are eyeing opportunities in the market. Kwan believes that the market is nearing a stage where valuations may become appealing for investment, with plans to start making deals in the second half of this year through next year. The firm is particularly interested in commercial properties in Shanghai and Beijing, anticipating a potential bottoming out in the market. Despite the current challenges, Kwan remains positive on the long-term prospects of China’s commercial real estate market, citing the country’s population size, demographics, and consumption patterns.
In response to the market conditions, Hong Kong-based Swire Properties has announced plans to double its gross floor area in mainland China by 2032. The company, known for its high-end shopping complexes branded “Taikoo Li” in major cities like Beijing and Shanghai, has seen improved foot traffic and retail sales surpassing pre-pandemic levels since pandemic-related restrictions were lifted. Swire’s chief executive, Tim Blackburn, noted the resilience of their office portfolio despite a weak office market. Looking ahead, the company anticipates 2024 as a “year of stabilization” in retail demand.
Despite the challenges faced by China’s commercial property sector, there are pockets of demand and opportunities emerging. With rents for prime retail locations in Beijing on the rise and sales of offices and commercial properties seeing an increase, there is potential for investors to capitalize on the market downturn. Investors like Joe Kwan are closely monitoring the market for signs of a bottoming out, with the expectation of making strategic investments in commercial properties in key cities. Companies like Swire Properties are also positioning themselves for growth, with plans to expand their presence in mainland China and expectations for a stabilization in retail demand in the coming year.
Overall, China’s commercial property sector is navigating through a challenging period, but there are signs of resilience and potential for growth. As demand for prime retail locations and commercial properties remains steady, investors are poised to seize opportunities in the market. With the outlook for the sector improving, companies like Swire Properties are expanding their footprint in China, while investors like Joe Kwan are gearing up to take advantage of potentially attractive buying points. Despite the current market downturn, there is optimism for the long-term prospects of China’s commercial real estate market, driven by the country’s population size, demographics, and consumption trends.
