Shanghai real estate investment market posts dismal third quarter

Macro factors and rising office supplies put the brakes on property deals, particularly among foreign investors, consulting firm claims.

Shanghai's real estate investment market witnessed further weakness in the third quarter, global real estate services firm Cushman & Wakefield said in a recent report.

Between July and September, en bloc investment deals valued at around 10.56 billion yuan (US$1.48 billion) were completed in the city, compared with some 15.04 billion yuan in the second quarter and 45.58 billion yuan registered in the first three months of 2019, according to Cushman & Wakefield data.

"Affected by some macroeconomic factors coupled with abundant new supply, the city's Grade A office market has been plagued by rising vacancy and subdued rentals in the first three quarters of this year, daunting therefore some institutional investors from overseas," said Eric Lu, executive director of capital markets for Cushman & Wakefield's East China operation. "At the same time, some domestic buyers have also been hindered from entering the market partly due to their limited financing channels."

Office space remained the most sought-after property type among investors during the period, accounting for 63 percent of total deals. Mixed-use properties and retail developments followed most closely, taking 16 percent and 14 percent, respectively.

On the investor side, only 7 percent of deals involved foreign buyers, Cushman & Wakefield data showed. This compares with 63 percent in the second quarter and 69 percent in the first quarter.

For the final quarter of this year, the property consultancy predicts that investors seeking offices for their own use would remain active, while high-quality industrial and logistics parks, as well as data centers, may also prove popular among buyers.

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