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Forecast total transaction volume to exceed RMB50 billion in 2021 Investors eye on tier 2, 3 cities with appetite for Industrial logistics, cold chain, data centers
- Transaction volume in Guangzhou and Shenzhen exceeds RMB50 billion for four consecutive years, forecast similar volume for 2021 while transactions extend to tier 2 cities in the region.
- Foreign investors increase investment in the Greater Bay Area especially low value assets in Southern China for geo-strategic asset allocation.
- Though transactions are still dominated by traditional industries, the mature transport network favours the development of new property types, with industrial logistics, cold chain, and data centers preferred by investors.
HONG KONG SAR – Media OutReach – 12 August 2021 – Global real
estate services firm Cushman & Wakefield announces Greater
Bay Area Commercial Real Estate Investment Market Review and Forecast 1H 2021 today.
The rapid development of the Greater Bay Area in recent years, coupled with a
maturing transport network, has driven industrial transformation and shifts in
real estate investment in the region. Apart from Shenzhen and Guangzhou,
investors also set eyes on tier 2 cities. Investment portfolios are increasingly diversified to include new types of properties such as industrial logistics,
cold chain and data centers, in addition to traditional office buildings and
shopping malls.
Source: Cushman
& Wakefield
Chart 1: Transaction
value of CRE investment in the Greater Bay Area in recent years
Chart 2:
Ratio of domestic and foreign investment
Chart 3: % of
CRE transactions by property type in Greater Bay Area
Chart 4: Some of the transactions in warehouses, logistics and data centers
in the Greater Bay Area in 2020 and 2021
Commercial real
estate investment transaction value in the Greater Bay Area
The launch of the Greater Bay Area initiative
in 2017 has drawn immediate attention from owner-occupiers, private investors
and funds. Commercial real estate (CRE) investment transactions have turned vibrant,
with Guangzhou and Shenzhen recording annual transaction value of over RMB 50
billions for four consecutive years. Such transactions include headquarters
purchase by corporations such as Li Ning, Qiaodan Sports, and Shenzhen
Expressway in Shenzhen. Driven by TMT (technology, media, telecom) companies, small
scale single-block buildings in Guangzhou have also attracted owner-occupiers.
“Outline Development Plan for the
Guangdong-Hong Kong-Macao Greater Bay Area” was officially announced in 2019,
setting a major development milestone for CRE investment market in the Greater
Bay Area.With more CRE investment opportunities emerging in other Greater Bay
Area cities, investors have been drawn to cities other than Guangzhou and
Shenzhen since 2019. The transaction valule has increased from RMB2.7 billion
(4% of the total) in 2019 to RMB3.4 billion (7% of the total) in 2020. Over RMB200
million (1% of the total) of such transactions were recorded in 1H21. Total
transaction volume for the full year of 2021 is expected to exceed RMB 50
billion, proving investors’ persistent interest
in the region. (Chart 1)
Distribution
of investors in the Greater Bay Area
Capitals in the Greater Bay Area used to be predominately domestic,
accounting for over 80% of the investment considerations. Yet foreign investors
also pay close attention to this market and their investment activities are increasing
year after year, especially in Guangzhou. With an outstanding macro-economic performance
and strong spending power, coupled with low availability of quality mixed-use commercial
portfolio in core locations, Guangzhou has become the investment target of
foreign investors.
Ms. Queeny So, Cushman & Wakefield’s Executive Director, Capital
Markets, China, shares, “Foreign investors have strengthened their
investment in the Greater Bay Area since 2018 and 2019. By 1H21, ratio of
foreign investment has surged from below 20% in the past to 25% (Chart 2). We
believe foreign investors have used to hold fewer assets in southern China. Yet
CRE investment in the Greater Bay Area, as a key strategic zone of China, creates
a golden opportunity for geo-strategic asset allocation, leading to a surge of
such transactions. We believe foreign investors will continue to look for new
investments in various Greater Bay Area cities. “
Types of CRE investment in the Greater Bay
Area
Strong consumption power of the Greater Bay
Area drives frequent CRE transactions (Chart 3). Of the various CRE types, traditional
asset class like office buildings and shopping malls in the Guangzhou-Shenzhen
area constituted the most transactions. With CRE asset value softened, many
occupiers and private investors are acquiring their current rental premises and
turn them into their headquarters. Key investments into major transactions are
still dominated by insurance capital For instance, the biggest transaction in
Shenzhen was the RMB6.6 billion purchase of Vanke Yuncheng project by Ping An
Insurance. Number of CRE transactions in Shenzhen is expected to be
record-breaking this year, with total transaction volume similar to that of
previous year. Average transaction volume may decline to around RMB1 billion
per transaction, slight drop from year 2020.
In Guangzhou, the scarcity of high-quality
office buildings in core locations has steered investors to other projects such
as shopping malls. In 1H21, the ratio of such transactions therefore rose to
over 30% of overall CRE transactions. For instance, Link REIT acquired Happy
Valley in Guangzhou this year at RMB 3.205 billion. Meanwhile, occupier-type
investors are more drawn to single-block office properties.
As the public transport network in the
Greater Bay Area matures, not only has commute time and distance greatly reduced,
but it also results in industrial transformation and population influx. This
has driven the rise of economy in tier 2 and 3 cities, resulting in new CRE
investment types such as industrial logistics, cold chain, data centers, etc.,
all of which are favored by investors and have recorded perpetual transactions
(Chart 4).
Mr. Alva To, Cushman
& Wakefield’s Vice President, Greater China, concludes, “Domestic
investors in the Greater Bay Area and cash-rich real estate funds have turned active
and kept close eye on opportunities in the market, resulting in an upsurge in CRE
transactions in 1H21. However, as transport and infrastructure facilities in
the region gradually complete and coupled with policy supportother Greater Bay
Area cities are getting more traction from investors. We believe investors will
turn to opportunities in tier 2 cities outside Shenzhen and Guangzhou. Investment
projects will also extend from traditional office buildings and shopping malls
to logistics, cold chain, and data centers, resulting in a more diversified CRE
market in the region.”
Please click HERE to download the official photo and
slide deck.
Photo captions:
Photo 1: Mr. Alva To, Cushman
& Wakefield’s Vice President, Greater China(Left), and Ms. Queeny So, Cushman & Wakefield’s Executive
Director, Capital Markets, China (Right)
Photo 2: Mr. Alva To, Cushman
& Wakefield’s Vice President, Greater China(Left), and Ms. Queeny So, Cushman & Wakefield’s Executive
Director, Capital Markets, China (Right)
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