Islamabad, Aug 5: The number of foreign investors in China’s commercial real estate market is declining, and those that remain are concentrating on specialized techniques like eco-friendly projects. According to MSCI, cross-border transactions into China’s commercial real estate from January to June 2024 came to $3.3 billion, a 13% drop from the same period the year before.
With $3.7 billion in acquisitions, Japan dominated the Asia Pacific market despite a 35% fall in transactions. Less impacted by geopolitical concerns, Singaporean investors continued to be the leading foreign purchasers of China’s commercial estates, with purchases totaling over 6.9 billion yuan ($1 billion) in the first half of 2024. The US invested 600 million yuan, a substantial decrease.
Although the first half of 2024 saw an 80% growth in Singaporean capital over the previous year, it was still far below its peak in the second half of 2019. The introduction of measures by the government in 2020 to restrict the borrowing by developers has caused difficulties for the Chinese property industry. Investor confidence is being impacted by the liquidation of large developers such as Evergrande.
Singapore’s national wealth fund, GIC, issued a warning, stating that China’s growth model which depends heavily on real estate has run its course. According to GIC’s Chief Investment Officer, Jeffrey Jaensubhakij, there is a marked decline in the view of China’s long-term real estate investment prospects.
A few investors are turning their attention to China. With Temasek Holdings’ support, Keppel Corp. has been cutting back on its holdings in China. CEO of Keppel Loh Chin Hua announced the sale of other properties for SG$280 million and land valued about SG$3 billion ($2.2 billion), pointing out that prospects in China are more difficult to come by than in places like Singapore and Vietnam. Keppel is currently concentrating on real estate services, like sustainable building renovations.
Some people recognize chances despite the difficult circumstances. Principal Financial Group is buying logistics hubs in China’s Yangtze River Delta and Pearl River Delta through a joint venture it established with China Construction Bank. Principal’s president of Asia, Thomas Cheong, emphasized the value of high-quality assets and reasonable seller expectations in the current market.
Due to decreased revenue from its logistics operation, which saw lower occupancy and rental rates, CapitaLand China Trust reported net property income of 631.3 million yuan for the first half of the year. This is a 4.9% decrease from the same period last year. The share price of the Singapore-listed REIT has decreased by 26% so far this year, trailing the benchmark Straits Times Index’s 4.4% increase.
According to the trust’s quarterly report released on July 30, Beijing’s weak office demand is likely to endure and the macroeconomic climate will determine when Beijing recovers. Lower rental costs in Japan are being caused by increased supply, but as real earnings rise, the nation’s consumption is probably going to increase.
