Self-use demand drives Shanghai's property investment market

Purchasers with self-use demand played a dominant role in Shanghai's real estate investment market in 2020, with investor activity, particularly among foreign firms, slowed by the pandemic, according to the latest research from major international property consultancies.

Last year, 64 en bloc deals valued at 69.04 billion yuan (US$10.63 billion) were concluded in the city, compared with 68 deals totaling 84.72 billion yuan recorded in 2019, CBRE data showed. En bloc deals for purely investment purposes were less than half of that amount -- 25.29 billion yuan.

"From buyers' perspectives, Shanghai's property investment market was no longer investor-driven, as self-use purposes outnumbered pure investment to become the primary driver in the local market last year," said Dominic Ho, head of capital markets, CBRE Eastern China. "A total of 27 office buildings were purchased by buyers for self-use purposes, which accounted for more than 60 percent of the city's total transaction volume in 2020."

A separate report released by JLL reinforces the diminished role of foreign investment.

Foreign investors' share of total transactions fell from 45 percent in 2019 to 16 percent last year, according to JLL, which set the city's full-year transaction volume at 76.5 billion yuan, a decline of 28 percent.

Self-use demand accounted for 67 percent of Shanghai's total transaction volume in 2020, while the office sector remained the most sought-after type among buyers, accounting for 82 percent of overall volume -- up from 59 percent in 2019 -- according to JLL.

Looking ahead, CBRE's Ho thinks investors should pay more attention to office buildings and business parks where leasing demand is robust and finance, technology, media and telecom firms are clustered, while opportunities may also emerge in retail projects and medium- to high-end rental apartments.