The commercial property sector in China is experiencing a surge in demand despite an overall slump in the real estate market. Specifically, the capital city of Beijing is witnessing a notable increase in rents for prime retail locations, marking the fastest pace since 2019, as reported by property consultancy JLL. The data reveals that rents have risen by 1.3% in the first quarter of this year compared to the previous quarter in 2023. This growth can be attributed to the growing interest from new food and beverage brands, niche foreign fashion offerings, and electric car companies, which are driving the demand for storefronts in shopping malls.
Despite the challenges posed by the Covid-19 pandemic and the general slump in the property market, there are signs of recovery in China’s commercial property sector. According to Wind Information, sales of office buildings and commercial-use properties have recorded a notable increase of 15% and 17% in floor area, respectively, in January and February compared to the previous year. In contrast, the floor space sold for residential properties saw a decline of nearly 25% during the same period. These figures indicate a shifting trend in the market dynamics, with commercial properties showing resilience and potential for growth.
Industry experts like Joe Kwan, the managing partner at Raffles Family Office in Singapore, see potential in the current market conditions for investing in commercial real estate in China. Kwan notes that commercial real estate prices are approaching attractive buying points, making it an opportune time for investors to consider entering the market. He anticipates making deals starting in the second half of this year and continuing through the next year, focusing primarily on properties in Shanghai and Beijing. While the market may not be fully recovered yet, Kwan remains optimistic about the long-term prospects of China’s commercial real estate sector due to its population size, demographics, and consumption trends.
Major players in the commercial property sector, such as Swire Properties based in Hong Kong, are also optimistic about the future growth opportunities in mainland China. The company has announced plans to double its gross floor area in China by 2032, signaling a commitment to expanding their presence in the market. Swire Properties’ high-end shopping complexes, known as “Taikoo Li,” have seen improved foot traffic and retail sales surpassing pre-pandemic levels in most malls post lifting of pandemic restrictions. Looking ahead, the company anticipates 2024 to be a “year of stabilization” in retail demand, further reinforcing the positive outlook for the commercial property sector in China.
While the real estate market in China has faced challenges in recent years, particularly due to the impact of the pandemic, the commercial property sector is showing signs of resilience and growth. With increasing demand for prime retail locations, attractive buying opportunities for investors, and positive expansion plans from key players in the industry, the outlook for the commercial real estate market in China appears promising.
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