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As China benefits from being “first in and first out” of the COVID-19 pandemic, it has become increasingly attractive to investors both locally and from around the globe. In response, as a joint effort of our Research, Valuation and Capital Markets teams, in late 2020 we conducted an investor intentions and cap rate expectations survey, collecting valuable responses from mainland China’s largest commercial real estate (CRE) investors, both domestic and international.
The survey results revealed strong investor interest in China’s Tier 1 cities – especially in office assets in Beijing and Shanghai, as well as growing interest in business parks. Investor interest in retail assets also remained relatively solid, driven by China’s rapid recovery from the pandemic. Not surprisingly, the majority of survey respondents also demonstrated interest in logistics and data centers in Tier 1 and surrounding satellite cities. Among the major Tier 2 cities, Hangzhou – China’s rising tech city and provincial capital city of Zhejiang, emerged as the top choice, followed by Chengdu.
In terms of cap rate expectations, cap rates for CBD office properties in Beijing and Shanghai will likely remain low in 2021, ranging between 3.9% and 4.6%. In contrast, office cap rates in Shenzhen and Tier 2 cities are expected to rise slightly. For retail investments, cap rates are expected to stay relatively steady in Shanghai, Guangzhou and the major Tier 2 cities, while an uptick in cap rate is likely in Beijing and Shenzhen. In addition, cap rates of business park properties are anticipated to remain stable across all major cities in China, while most respondents expect further compressions in cap rates of logistics facilities and data centers in and around Tier 1 cities.
Download the Report Read MoreLast year was a tough one for commercial real estate in Singapore and Malaysia. But with record-breaking transaction volumes rounding out 2020 and Covid-19 vaccines rolling out at speed, there’s hope on the horizon.
Download the Report Read MorePrivate assets face demands for transparency amid greater interest from investors seeking to understand risks, performance and how these investments compare to public securities. We speak with Peter Shepard, Head of Fixed Income, Multi-Asset Class and Private Asset Research and Brian Schmid, Global Head of Product Management and Applied Research at Burgiss.
Read MoreOccupiers adopt remote-working concept
At the end of the first quarter of 2020, the country was forced to go into a complete lockdown of business activity due to the pandemic.In March 2020, workplaces were shut, and employees were working from home for the first few weeks. By May 2020, while workplaces had begun to re-open partially with easing lockdown restrictions, not all companies were asking their employees to return to office. Further, we are still witnessing a large proportion of employees working from home. The trend of ‘Work-from-home’ and ‘Work-from-anywhere’ has gained significance thereafter and occupiers have displayed openness to remote working. The poll results suggest that a majority (60%) of occupiers foresee about 21% to 40% of their workforce to be working from a non-office location over the next 12-24 months. However, as occupiers are revisiting their density plans in existing offices to enable a safe return for employees, we expect a gradual revival of the sector and office absorption should start showing signs of recovery in H2 2021. We believe that occupiers will likely resort to a ‘hub & spoke’ model, offering flexibility to employees to work from anywhere or near clients. Hence, the indications are that flexible workspaces will likely gain significance in such a scenario.
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