China Is Becoming a Top Location for Global Investors
20 Oct, 2011, China
Investors are flooding into commercial property markets in core global cities, according to a report from global property consultant Cushman & Wakefield. With volatility returning to financial markets and uncertainty about the global economy widespread, investors are continuing their “flight-to-quality” and are looking for sale opportunities in mature, regulated markets.
The “Winning in Growth Cities” report identifies the largest and fastest-growing cities in terms of commercial real estate investment, the difference in pricing, as well as demand and activity within individual sectors. The report is based on estimates for the year to Q3 2011. According to the report, New York is the top city for real estate investment at a global level; while London remains the top choice for overseas investors, followed by Paris and then New York. Over the past 12 months to Q3 2011, Shanghai and Beijing ranked 14th and 15th respectively in the Top 25 Cities for Global Property Investment.
Asia Pacific exclusively dominated the global development site/land market over the past 12 months to Q3 2011, with the top 25 locations totaling just short of US$200 billion. Among the top 25 cities, 23 are in China. China is the key country with Shanghai ranking first, recording US$25.5 billion transacted. Other top Chinese cities include Dalian, Wuhan, Suzhou, Hong Kong and Chongqing. The key driver behind this is that China is going through a period of fast-paced urbanization, fuelling the investment activities in real estate all over China.
As the stringent control on the residential sector continues in most tier 1 and tier 2 cities, China has experienced a capital flow into the commercial sector. In the past 9 months to Q3 2011, Beijing recorded a total volume of just short of US$2 billion of en-bloc investment transactions ( including office, retail serviced apartment, mixed-use/complex, hotel and industrial property), while Shanghai recorded a total of over US$4 billion.
Shanghai has been attracting both domestic and international investors, continuing to be the most popular destination among investors in China. In the past year, the investment team of Cushman & Wakefield China, led by Jack Ye, National Director of Investment, has successively completed 5 transactions, totaling more than RMB6.5 billion.
On the investment market in China, Jack Ye commented, “With the government control on the residential sector continuing to tighten, real estate developers are beginning to experience difficulties in funding, which will lead to an increasing demand for capital raising. Currently, the residential market has seen several reserve price land transactions, resulting in a pessimistic outlook for the residential market. However, this is a great opportunity for developers with positive cash flow to purchase land or M&A. Overall, China is a prime location for global investors. In terms of commercial real estate, we are seeing an increasing appetite for high-quality projects in prime locations, as well as for retail space in tier 2 and tier 3 cities. We anticipate that SOEs and insurance companies with strong fund-raising capabilities will become the majority of investors for office space.”
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