• Greater China market outlook 2018

    20 February 2018

    Major Real Estate Trends in Greater China

     

    RAPID EXPANSION OF CO-WORKING SECTOR

    The expansion of co-working space in Greater China is expected to continue rapid expansion in 2018. Hong Kong, particularly Kowloon and the New Territories, which still lack co-working space, along with gateway cities in China including Beijing and Shanghai, are expected to see stronger growth. Major tier II cities in China, including Hangzhou and Chengdu, will be the main focus for expansion by leading co-working operators.

     

    OFFICE DECENTRALISATION

    Decentralisation is expected to remain as one of key office market trends in Greater China. Shanghai and Hong Kong where footprints of financial sector tenants are usually larger will continue to see banks and other big financial institutions relocating some of their back-to-middle office operations to more cost-effective submarkets outside of the CBDs. The fast expansion of the tech sector in mainland China and Taiwan will also drive strong demand for decentralised office space in both Tier I and Tier II cities.

     

    STABILISATION OF RETAIL RENTS AMID IMPROVING DEMAND

    The Greater China retail market is expected to see further mild growth in 2018, with Mainland China, Hong Kong and Taiwan markets forecast to register retail sales growth of 10%, 1.8% and 3.6%, respectively. Despite improving demand, significant new supply and high vacancy rates pose a challenge for many retail markets in Greater China.

     

    INFRASTRUCTURE AND FORMATION OF NEW LOGISTICS HUB

    Between 2016-2018, China commenced the construction of 303 new infrastructure projects worth a total investment of RMB 4.7 trillion. Improved intercity and inner city infrastructure will strengthen existing logistics centres and create new hubs. The role and importance of traditional logistics hubs including Beijing, Shanghai, Shenzhen, Guangzhou, Hong Kong, and Chengdu will be enhanced by the completion of new infrastructure. Hefei and Zhengzhou aim to play a key role in opening up inland regions and forming a Central China logistics centre. Elsewhere, the construction of a new airport and High-Speed Railway, along with the development of the maritime silk road and Fujian Free Trade Zone, will confirm Xiamen as an international shipping centre in Southeastern China.

     

    VALUE-ADD INVESTMENT

    Low yields have been characterizing the property investment markets in the key Greater China gateway cities in recent years. Core assets have become the target of end-users and long-term corporate investors looking for stable income stream who put less emphasis on initial yields. Institutional investors, on the other hand, focus on schemes with value-add opportunities. They achieve capital gain through property and tenancy upgrades. The more the core assets in the hands of end-users and long-term corporate investors, the fewer the options left in the investment market over the near-term future. Value-add is expected to remain a key investment strategy in leading Greater China cities in 2018. New space utilization concepts such as co-working and co-living will also back opportunistic purchase of other niche commercial assets.

     

     

    For further details, please visit the CBRE Global Research Gateway.

     

     

     

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