Markets here have varied levels of maturity
CBRE, the world’s largest commercial property services firm in terms of revenue, opened its newest China office last month in Xi’an, capital of Shaanxi Province. The Los Angeles-based global property consultancy, which entered China in 1978, now has 11 offices here, providing services in more than 100 cities.
Martin Samworth, group president and chief executive officer for Advisory Services for Europe, the Middle East, Africa and the Asia-Pacific, was in Asia last month working with the local CBRE leadership teams and deepening his knowledge of the region’s real estate market, which came under his belt of authority in January 2019.
In China, he visited Xi’an, Beijing, Shanghai and Shenzhen before heading for Hong Kong to round out a trip that also included Singapore and Tokyo.
A 36-year veteran with CBRE, Samworth predicts that China will probably become the company’s largest market outside of the US within the next five years. During an exclusive interview, he sat down with Shanghai Daily to share some of his views on the rapid development of commercial real estate in China and the nation’s increasing role in the world property investment market.
CBRE was formerly known as Coldwell Banker Richard Ellis.
Q: What is your impression of China’s commercial real estate market after touring several cities over the past week?
A: It’s a really interesting and fascinating trip. Shanghai is a huge city with so much dynamism, and there is a huge amount of real estate activity and lots of new offices and residential development in Xi’an as well over the last five or 10 years. The three places I’ve been to, which have slightly different characteristics from a market point of view and a market-maturity point of view, are all very dynamic.
The pace at which things are being done has impressed me. In other places, sometimes the lead-in period for such development could be much longer, six or seven years in some cases. It’s just great to see that when the decision has been made, the process gets under way and things can happen very quickly. The quality of the buildings and the scale of the development are also impressive.
Q: Could you comment on the development of commercial real estate in China as well as the growth of CBRE here over the past four decades?
A: Our business has been growing well ever since we’ve been here, and it has matured and diversified. We see huge opportunity in China. The markets here have different levels of maturity, but we are seeing that evolution takes place very rapidly and that trend is continuing and will probably speed up. We just see an opportunity for us to continue to extend our work with lots of developers, investors and government authorities to help drive up the values of their real estate assets, whether they are an occupier or an investor. As for CBRE’s growth, it sort of went through a phase of quick growth, then slowed down a bit and in the last two years we are really taking off again. We will continue to focus on recruiting more high-quality talent to the business and help existing staff to continue to grow. In the business world, nothing stands still very long, so we have to be at the forefront of evolving services and using technology to continue to be more competitive.
Q: What role does China play in your regional operation? How do you expect your China business to expand in the next couple of years and what will be your growth engines?
A: It’s perfectly feasible that within the next five years, China could be CBRE’s largest market outside of the US.
There is significant opportunity in office leasing and property management, which is growing very rapidly. Meanwhile, lots of companies are now looking at their “landscapes” and are keen to create a more productive and conducive work environment, a real sense of community in their offices to attract a younger-generation talent. We are looking very closely at that.
Q: What are the prospects for commercial real estate investment in China?
A: What we’ve seen happen more in the last few years is the continuous flow of international capital and the openness of the market. The capital has become very diversified. There is very strong local and regional investment participation and increasing international investment participation, which is a very positive thing. It’s the same in London, where 80 percent of capital market deals are made by international investors, and recently, half of that 80 percent has been Asian capital. Everyone is looking for value opportunities and looking to diversify. In Asian markets, China is increasingly an attraction to global capital.
Q: Data from the third quarter showed that only 14 percent of real estate investment in China involved foreign buyers, a sharp drop from 46 percent in the first half. How do you explain that?
A: Sometimes markets pause a bit, and sometimes you have to reset expectations. Some local economic issues might come into play as well. I think, fundamentally, there is a medium to long-term belief that places like Shanghai and Beijing are very mature markets that are continuing to grow. The point of entry might vary a couple of quarters or years in some cases, but you will see continuing international activities here.
Q: What are the recent major industry trends you have seen?
A: We see an emergence of alternative assets that have become of much more interest to investors, whether it be health care, private rentals or the hospitality sector. Those alternative sectors have now established themselves in a clear segment of the market, alongside offices, retail and industrial logistics. What we have also seen is that clients want more and more bespoke solutions.
You need to aggregate different parts of the business to create a solution. The whole principle for us now is that we should be able to have experts in all components of the life cycle of a real estate asset — from land to the design of the scheme, mix of the scheme, construction of the scheme, financing of the scheme, letting of the scheme, the sale of it, the future management and even running the plant equipment.
Many clients, particularly occupier clients, want one service provider that can deliver all of that for them.