Recently, the China’s shaky economy and financial markets have taken a sharp twist. The trade war has been escalated with Yuan touching its record low compared with the USD. Sadly, the China’s economy, which seemed to be upholding earlier this year, has continued to drop down. The retail sales also raises at the slowest pace in 16 years. All these difficulties and downward trends hint at the weak Chinese economy except for the one sector in which the transaction volumes are shooting up — yes, it’s China’s commercial real estate market.
China has emerged as a leading Industrial estate player in recent times and obviously it’s a very promising news for the sector. An interview with a Chinese entrepreneur who owns FrontechChina — Manufacturer of Brake Pads revealed that the low risk environment and good property locations, commercial real estate has long been a compelling asset for international investors, giving substantial profit margin to the Chinese real estate sector.
According to a report on industrial capital markets presented by Avison Young, international investors procured roughly $4.3 billion in the US industrial estate assets between January and March and the Q1 2017. International investors procured 79 commercial properties across the country in Q1 2017 alone that contributed to around $1.3 billion in trade volume. The amount of investment being used by the Chinese investors is surprising though. The recent statistics suggest that the Chinese investors bought $284.9 million in industrial commercial estate sector in first quarter of 2017 which is amazingly high if compared with $5.2 million figure of the similar timeframe last year. All in all, there’s a 540% increase if we compare this figure to the last year’s statistics.
This report clearly illustrates that China is finally in a position to add to the growth and development of the industrial real estate sector. China is one of the biggest courtiers with a colossal amount of wealth to deploy. Commercial real estate in China continues to be a promising asset class and a key element to a well-established real estate portfolio.
Another report presented by popular property advisor Jones Lang LaSalle depicted a massive high in this year’s Q1 with a USD 17 billion figure. This was the biggest indicator that showed the powerful performance of the Asia-Pacific region where industrial property transactions raised tremendously by 14%.
According to the owner of NewWayBag — Manufacturer of Cotton Bags Wholesale, the rise in the real estate industrial sector comes at an appropriate time when the world’s other major markets are facing a sharp decline in transaction volumes.
The report presented by Jones Lang LaSalle also revealed that industrial real estate investment dropped down by 8% in the Q1 of the current year to USD 156B, taken down by the fall of massive 22% drop down in transaction volumes in the European countries and 8% decline in the US real estate sector.
The decline in global property this year is mainly because of the sharp 17% decline in cross-border capital flows which is also said to be the key driver of industrial real estate over the past few years.
Also, the capital investment by both local and foreign investors in commercial real estate sector is booming in China. The LaSalle’s report reveals that Shanghai was the world’s second largest most traded investment market after Tokyo, fetching in USD 6.3 billion of investment which is slightly greater than the world’s biggest investing states like New York and London. Also, Shanghai has emerged as a second largest receiver of cross-border capital flows after London.
According to a report published by Real Capital Analytics, Beijing was the most liquid real estate market that overtook Hong Kong and Tokyo in the Asia-Pacific region.
The investment volume raised around 66% in Shanghai in Q1, elevated by six major investment transactions. The biggest deal finalized was done in the month of February by Greenland Group.
An interview with a Chinese entrepreneur who owns SunEcoChina — Manufacturer of Solar LED Street Lights revealed that the huge price discount is one of the reasons the forced disposal of assets that were hit hard by the deleveraging campaign. That is why affluent local and international buyers are investing more and more money into mainland property.
The Final Words…
The combination of different factors make the Chinese commercial real estate sector a low-risk high-profit investment opportunity for domestic and foreign investors. Investors pouring money into real estate is also being bolstered by the government’s focus towards simulative policies. Dissimilar to the other major real estate markets like Europe and America, real estate investors in China take advantage from a strong political commitment to fortify the commercial real estate sector in China.
While China’s developing real estate economy continues to be a point of concern in international financial markets, the world’s second largest economy is substantially outperforming other major economies in the real estate sector.