Real estate investment in city picks up steam
Real estate investment activity in Shanghai picked up in the first half of 2021, with increased interest from institutional buyers, according to the latest research by major international real estate advisory firms.
39 en bloc deals totaling 29.4 billion yuan ($ 4.54 billion) were signed in the city between January and June, up 80 percent and 19 percent, respectively, from the second half of 2020 according to published data from Cushman & Wakefield.
“Shanghai’s real estate investment market has shown great resilience in the first six months of this year, with major deals including Link REIT’s purchase of a 50 percent stake in Shanghai Qibao Vanke Plaza for 3.2 billion yuan,” said Alvin Yip, China President of Cushman & Wakefield Capital Markets. “In particular, buyers purely for investment purposes accounted for 69 percent of the total transaction value, a significant increase compared to the 26 percent registered in the second half of 2020.”
Overseas buyers accounted for 38 percent of the total transaction value, data from Cushman & Wakefield showed.
For the three-month period that ended in June, a separate report from Savills showed that 15 investment transactions valued at 13.4 billion yuan were completed across the city, down 21 percent from the previous year. However, the total consideration could be nearly 42.3 billion yuan, according to Savills research, when the estimated consideration of assets from portfolio transactions is factored in.
“The market is seeing increasing interest from institutional buyers looking to take advantage of the attractive pricing environment, access to large portfolios and the recovery in market fundamentals,” said Elle Xu, senior manager research at Savills China. “Several large portfolio transactions were announced towards the end of June, including the purchase of 55 percent of SOHO China by Blackstone for 19.5 billion yuan, the purchase of a real estate portfolio of five retail properties from Macquarie for 8.9 billion yuan by Brookfield, and that of Ping ‘ to Insurancean purchase of shares in six Raffles City developments for 33 billion yuan, all of which include one or more core or core plus facilities in Shanghai. “
Looking ahead, end users will remain active and more investors are likely to enter the rental housing segment – which is increasingly receiving government support due to the robust demand for affordable housing from young professionals – mainly by converting idle or unused assets and exiting the market by setting up a real estate investment trust, so the prognosis of Savills.