Shanghai real estate investment market surges to three-year high

Shanghai's real estate investment market will "very likely" pass 100 billion yuan (US$15.52 billion) again this year amid significant recovery in demand.

Major international property consultancy Cushman & Wakefield said that between January and September, 61 en bloc deals valued at a total of 83.3 billion yuan were completed around the city.

The third quarter recorded 20 deals worth 53.1 billion yuan, Cushman & Wakefield said in its latest quarterly report.

"Demand unleashed in the third quarter of this year with buyers with pure investment purposes being active,"said Alvin Yip, Cushman & Wakefield's China president of capital markets.

"For the first time in three years, the city's property investment transactions should pass the 100-billion-yuan barrier, which signals a full-fledged recovery of the market."

Shanghai's real estate investment market suffered weakness in 2019 and 2020 following three years' boom from 2016 to 2018 when en-bloc real estate investment all stayed above the 100-billion-yuan threshold.

Shanghai's property investment market has become investor-driven again. During the first three quarters, deals worth 53.4 billion yuan, or 64 percent of the total, were concluded by buyers only for investment, Cushman & Wakefield said.

Retail properties were the most sought-after, accounting for 68 percent of the 53.4 billion yuan worth of deals involving buyers with pure investment purposes.

Nationwide, en-bloc transaction volume for 2021 may exceed 250 billion yuan, an increase of over 20 percent from 2020, according to a separate report released by CBRE.

"China's commercial real estate market is entering a new growth cycle, offering investors with both cyclical and structural opportunities," said Sam Xie, head of research, CBRE China. "Investors are proactively pursuing and processing opportunities in gateway cities like Beijing, Shanghai and Shenzhen, especially business parks and prime offices, benefiting from the structural upgrading of the Chinese economy."

Investment prospects for industrial and logistics properties, which have become red hot among global investors after the COVID-19 pandemic mainly fuelled by the accelerated growth of the online economy and life science industry, will be extremely rosy in the next five to 10 years, he said.

The company's recent China investor intentions survey found that 47 percent of the respondents chose industrial and logistics as their most preferred sector, ranking the first among mainstream asset types.

Sustainable growth of demand amid economic transformation, the country's official launch of public REITs which further uplift the liquidity of industrial assets, and their great potential to become an attractive target for global asset allocation, are the three main factors driving demand for industrial and logistics assets investment in China over the next decade, CBRE said.