City real estate market to stay 'patchy'

Subdued sentiment continued to prevail in Shanghai's real estate investment market in the third quarter despite increased interest in alternative sectors, global property adviser JLL said in a report released on Tuesday.

Between July and September, en bloc deals valued at 14.5 billion yuan (US$2.14 billion) were concluded in the city, a decrease of 16.6 percent from the previous quarter and a retreat of 18.6 percent from the same period a year ago, according to JLL's latest quarterly data.

Office assets remained the top option for buyers with transactions hitting 9.5 billion yuan, or 65.5 percent of the total. However, non-office assets continued to gain popularity with institutional investors, due in part to economic uncertainties and large supply in the office market.

Data centers, logistics and industrial assets valued in total at 2.7 billion yuan, for instance, were traded during the past quarter, accounting for 18.6 percent of total transactions.

"Investor sentiment and transaction volumes will probably stay patchy through the last quarter of this year," said Jim Yip, head of capital markets for JLL China and East China. "Alternative asset classes such as data centers have become compelling investment options for many investors and we expect investors to mitigate risks by increasing diversification within their portfolios, especially through increasing their exposure to logistics and alternatives sectors."

During the first nine months of 2020, major real estate investment deals totaled 55.2 billion yuan in Shanghai, a significant setback from the 93.9 billion yuan registered in the same period last year, according to JLL data.

Grade A office rentals continued their downward trajectory in Shanghai in the past quarter amid ample new supply and subdued demand with CBD rents declining 2.1 percent quarter over quarter and decentralized rents shedding 2.6 percent, JLL data showed.