January 20, 2015, Beijing – Cushman & Wakefield, the world’s largest privately-held commercial real estate services firm, has published the Beijing Investment MarketBeat report for Q4 2014. China’s economy continued to cool in 2014 and a variety of factors are likely to further constrain economic growth in 2015. Stable expansion still depends on fixed-asset investment, including in infrastructure and real estate. Liquidity management, cost control and sales growth are likely to become key concerns for developers in the 2015. Policy changes have affected the market’s performance dramatically in 2014. The central government's five-year nationwide ban (announced in 2013) on the purchase of office buildings by all government agencies, including state-owned enterprises, began to have a major impact in Beijing, especially on sales of high-end projects.
According to the latest data released by the Beijing Bureau of Statistics, during the first 11 months of 2014, total completed investment in office development reached RMB 68.62 billion, up by 25.2% year-on-year; completed investment in the development of non-office commercial property totaled RMB 103.7 billion, a decrease of 2.3% year-on-year. At present, developers are still struggling with limited financing channels (especially small and medium-sized developers), high financing costs, weak liquidity and slower sales. Therefore, the priority for developers in 2015 will be to stabilize cash flows and improve sales.
Billy Lo, General Manager, Beijing Office, Cushman & Wakefield said: “Throughout 2014, Beijing, along with Shanghai, remained one of the top Chinese city destinations for real estate investment institutions, due to the liquidity, size and growth potential of the city’s market. Investors showed particular interest in high-quality properties in the core submarkets offering stable rental returns as well as strong consumer spending and a convenient transportation network in the area.” Overall, Beijing is shifting from an incremental market to a market saturated with inventory. Investment institutions that are capable of post-investment operations management and building renovation should be better positioned to capture potential opportunities in the market; Gaw Capital’s purchase of Pacific Century Place for RMB 5.7 billion is the most notable recent example. The Beijing real estate investment market is seeing a combination of active price inquiries from investors and caution when it comes to the final decision to close a deal.
Entering 2015, the investment market may continue to face challenges with tight liquidity and diverging price expectations between buyers and sellers. The nationwide ban on office building purchases by all government agencies should continue to impact state-owned enterprises in 2015. Coupled with strong outbound activity from Chinese developers, this has reduced the level of investment activity in completed en-bloc office properties and leveled the playing field once more for experienced foreign real estate investors.
Ted Li, Executive Director, Capital Markets, Cushman & Wakefield said: “Despite slight yield growth in the market overall, core products will likely see yields remain at the current low levels due to robust investment demand and the limited number of tradable high-quality assets available for sale in Beijing.”
About Cushman & Wakefield
Cushman & Wakefield is the world’s largest privately‐held commercial real estate services firm. The company advises and represents clients on all aspects of property occupancy and investment, and has established a preeminent position in the world’s major markets, as evidenced by its frequent involvement in many of the most significant property leases, sales and management assignments. Founded in 1917, it has approximately 250 offices in 60 countries, employing more than 16,000 professionals. It offers a complete range of services for all property types, including leasing, sales and acquisitions, equity, debt and structured finance, corporate finance and investment banking, corporate services, property management, facilities management, project management, risk management, consulting and appraisal. A recognized leader in local and global real estate research, the firm publishes its market information and studies online at www.cushmanwakefield.com/knowledge.