Greater Bay Area commercial real estate market turns vibrant | Taiwan News
Forecast of the total transaction volume of over 50 billion RMB in 2021 Investors in view of tier 2, 3 cities with an appetite for industrial logistics, cold chain, data centers
- Transaction volume in Guangzhou and Shenzhen will exceed 50 billion RMB for four consecutive years, with a similar volume forecast for 2021, while transactions extend to tier 2 cities in the region.
- Foreign investors are increasing their investments in the Greater Bay Area, particularly in South China assets of low value for geostrategic asset allocation.
- Although transactions are still dominated by traditional industries, the mature transport network favors the development of new property types, with industrial logistics, cold chain and data centers being preferred by investors.
HONG KONG SAR – Media OutReach – August 12, 2021 – Global real estate services company Cushman & Wakefield today announces a market review and forecast for commercial real estate investments in the Greater Bay Area. The rapid development of the Greater Bay Area in recent years, coupled with a mature transport network, has driven industrial change and relocations in real estate investments in the region. In addition to Shenzhen and Guangzhou, investors are also looking at tier 2 cities. Investment portfolios are becoming increasingly diversified and, in addition to traditional office buildings and shopping centers, also include new types of real estate such as industrial logistics, cold chains and data centers.
Source: Cushman & Wakefield
Figure 1: Transaction value of commercial real estate investments in the Greater Bay Area in recent years
Figure 2: Ratio of domestic and foreign investments
Figure 3:% of Commercial Property Transactions by Property Type in the Greater Bay Area
Figure 4: Some of the transactions in warehouses, logistics and data centers in the Greater Bay Area in 2020 and 2021
Transaction value for commercial real estate investments in the Greater Bay Area
The launch of the Greater Bay Area initiative in 2017 immediately caught the attention of owner-occupiers, private investors and funds. Commercial Real Estate (CRE) investment transactions have grown dynamically, with Guangzhou and Shenzhen recording an annual transaction value of over RMB 50 billion for four consecutive years. Such transactions include the purchase of headquarters by companies such as Li Ning, Qiaodan Sports, and the Shenzhen Expressway in Shenzhen. Driven by technology, media, telecommunications (TMT) companies, small one-block buildings in Guangzhou have also attracted owner-occupiers.
The “Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area” was officially announced in 2019 and sets an important development milestone for the commercial real estate investment market in the Greater Bay Area. With more commercial real estate investment opportunities emerging in other cities in the Greater Bay Area, investors have been drawn to cities other than Guangzhou and Shenzhen since 2019. The transaction value has increased from 2.7 billion RMB (4% of the total value) in 2019 to 3.4 billion RMB (7% of the total value) in 2020. Over RMB 200 million (1% of the total) of such transactions were recorded in 1H21. The total transaction volume for the full year 2021 is expected to exceed 50 billion RMB, which proves the continued interest of investors in the region. (Chart 1)
Distribution of investors in the Greater Bay Area
The capital cities in the Greater Bay Area used to be predominantly domestic and accounted for over 80% of investment considerations. But foreign investors are also paying close attention to this market and their investment activity is increasing year after year, especially in Guangzhou. With an outstanding macroeconomic performance and strong purchasing power, coupled with the low availability of a high-quality mixed-use commercial portfolio in core locations, Guangzhou has become an investment destination for foreign investors.
Ms. Queeny So, Executive Director of Cushman & Wakefield, Capital Markets, China, said: “Foreign investors have increased their investments in the Greater Bay Area since 2018-2019. Exceeded to 25% by the 1st (Figure 2). We believe that foreign investors used to hold fewer assets in southern China. Nonetheless, commercial real estate investments in the Greater Bay Area, a strategically important zone in China, offer a unique opportunity for geostrategic asset allocation. which leads to an increase in such transactions. We believe that overseas investors will continue to seek new investments in various cities in the Greater Bay Area. “
Types of Commercial Real Estate Investments in the Greater Bay Area
The strong consumer power of the Greater Bay Area leads to frequent CRE transactions (Figure 3). Of the various types of commercial property, traditional asset classes such as office buildings and shopping malls in the Guangzhou-Shenzhen area accounted for the most transactions. With the weakened CRE asset, many users and private investors acquire their current rental space and make it their headquarters. Major transaction investments are still dominated by insurance capital. For example, the largest transaction in Shenzhen was Ping An Insurance’s purchase of the Vanke Yuncheng project for RMB 6.6 billion. The number of CRE transactions in Shenzhen is expected to be record breaking this year, with total transaction volume similar to last year. The average transaction volume can drop to around 1 billion RMB per transaction, a slight decrease from 2020.
In Guangzhou, the shortage of high-quality office buildings in core locations has drawn investors to other projects such as shopping centers. In 1H21, the proportion of such transactions rose to over 30% of the total CRE transactions. Link REIT, for example, acquired Happy Valley in Guangzhou for RMB 3.205 billion this year. In the meantime, user-oriented investors are more likely to be drawn to single-block office properties.
As the public transportation network in the Greater Bay Area matures, not only have commute times and distances reduced significantly, but so has industrial change and population influx. This has spurred economic recovery in tier 2 and tier 3 cities, which has led to new types of commercial real estate investment such as industrial logistics, cold chain, data centers, etc., all of which are favored by investors and have seen perpetual transactions (Graph 4).
Cushman & Wakefield’s Vice President Greater China, Mr. Alva To, concluded, “Domestic investors in the Greater Bay Area and wealthy real estate funds have taken action and closely monitored opportunities in the marketplace, which has resulted in a surge in CRE Transactions in 1H21. However, as transportation and infrastructure facilities in the area are gradually completed and connected with political support, other cities in the Greater Bay Area will gain more investor appeal. We believe investors will find investor opportunities in Tier 2 cities outside from Shenzhen and Guangzhou. Investment projects will also range from traditional office buildings and shopping malls to logistics, cold chains and data centers, leading to a more diversified CRE market in the region. “
Please click HERE to download the official photo and slide deck.
Photo 1: Mr. Alva To, Vice President of Cushman & Wakefield, Greater China (left), and Ms. Queeny So, Executive Director of Cushman & Wakefield, Capital Markets, China (right)
Photo 2: Mr. Alva To, Vice President of Cushman & Wakefield, Greater China (left), and Ms. Queeny So, Executive Director of Cushman & Wakefield, Capital Markets, China (right)
About Cushman & Wakefield
Cushman & Wakefield (NYSE: CWK) is a leading global real estate services company delivering exceptional value to real estate users and owners. With around 50,000 employees in over 400 offices and 60 countries, Cushman & Wakefield is one of the largest real estate services companies in the world. In Greater China, a network of 22 offices serves local markets across the region that have received recognition and multiple awards for industry-leading performance. The company had worldwide sales of $ 7.8 billion in 2020 with core services including valuation, consulting, project and development services, capital markets, project and user services, industry and logistics, retail and others. To learn more, visit www.cushmanwakefield.com or follow us on LinkedIn (https://www.linkedin.com/company/cushman-&-wakefield-greater-china)
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